The Institutions of Federal Reserve Independence

55 Pages Posted: 7 Jun 2013 Last revised: 18 Jul 2016

See all articles by Peter Conti-Brown

Peter Conti-Brown

University of Pennsylvania - The Wharton School; Brookings Institution

Date Written: October 1, 2015


The Federal Reserve System has come to occupy center stage in the formulation and implementation of national and global economic policy. And yet, the mechanisms through which the Fed creates that policy are rarely analyzed. Scholars, central bankers, and other policymakers assume that the Fed's independent authority to make policy is created by law-specifically, the Federal Reserve Act, which created removability protection for actors within the Fed, long tenures for Fed Governors, and budgetary autonomy from Congress.

This Article analyzes these assumptions about law and argues that nothing about Fed independence is as it seems. Removability protection does not exist for the Fed Chair, but it exists in unconstitutional form for the Reserve Bank presidents. Governors never serve their full fourteen-year terms, giving every President since FDR twice the appointments that the Federal Reserve Act anticipated. And the budgetary independence designed in 1913 bears little relation to the budgetary independence of 2015. This Article thus challenges the prevailing accounts of agency independence in administrative law and central bank independence literature, both of which focus on law as the basis of Fed independence. It argues, instead, that the life of the Act-how its terms are interpreted, how its legal and economic contexts change, and how politics and individual personalities influence policymaking is more important to understanding Fed independence than the birth of the Act, the language passed by Congress. The institutions of Federal Reserve independence include statute, but not only the statute. Law, conventions, politics, and personalities all shape the Fed's unique policy-making space in ways that scholars, central bankers, and policy-makers have ignored.

Keywords: Federal Reserve, agency independence, central bank independence, institutional design, administrative law, banking, Federal Reserve history

JEL Classification: B22, E50, E58, G20, K20, K23, N12, N22

Suggested Citation

Conti-Brown, Peter, The Institutions of Federal Reserve Independence (October 1, 2015). 32 Yale Journal on Regulation 257 (2015), Rock Center for Corporate Governance at Stanford University Working Paper No. 139, Available at SSRN: or

Peter Conti-Brown (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

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