(Disclosure—I helped design the survey on Fed autonomy mentioned in this article)
Next week America will choose a new president. According to one poll, 58% of bankers believe former U.S. President Donald Trump would be better for the financial sector vs. 35% who think the policies of Vice President Kamala Harris would be more beneficial.
But while bankers may favor President Trump, they are not big fans of his push to make the Federal Reserve more subservient to the president. According to a recent bank industry survey, only 5% would support an effort to “force” the Fed to consult with the president on interest rate decisions, and just 7% wanted to give the president the power to demote or replace a Fed chair. (Disclosure: I was hired by IntraFi to help design the survey on Fed autonomy. However, I do not receive any financial compensation from individuals participating in its poll.)
The Fed is the nation’s leading independent agency. Because it does not rely on Congress and the White House for annual budget appropriations, it does not have to worry that its funding (which primarily comes from the interest earned on the securities it owns) will be cut off if it decides to raise interest rates. Furthermore, the leadership of the central bank (the governors and Fed Chair) are appointed for a term and cannot be removed from office by the President simply because of a policy disagreement.
While other agencies are legally established as “independent,” few have the level of autonomy the Fed does. The vast majority of these departments rely on Congress for funding and many political appointees, such as the Administrator of the Environmental Protection Agency (EPA), can be fired at will by the President.
