The retweet below triggered me, so here is a long rant about the institutional problems at the Fed and New York Fed President John Williams. --- Congress amended the Federal Reserve Act in November 1977, adding the dual mandate of maximum employment and price stability. The point of mandates is forcing a "narrow understanding" of the role of monetary policy, not to expand it as Williams seems to be suggesting. Furthermore, citing an example of monetary policy in the spring of 1932 overlooks the fact that Congress altered the Fed's role and operating procedures with both the Banking Act of 1933 (also known as the "Glass-Steagall Act") and the Banking Act of 1935. Glass-Steagall established the current FOMC voting structure. (Before 1933, monetary policy was set by representatives of the 12 district banks, not necessarily the President of the district bank.) In other words, a lot has changed since 1932 to rein in the authority of the Fed, limit its tools, and force a "narrow understanding" of Fed policy. Williams is suggesting they continue to ignore this (as they have since 2008). --- Let's cut to the chase. Williams is criticizing his new FOMC colleague, Stephen Miran, in a back-handed way to criticize the President. I have no problem with such criticism as long as it is applied evenly. So, unless I missed it, please show me where Williams also criticized: * The limitation and failure of the current policy in seeing and responding to the post-COVID inflation surge. What has been corrected to prevent this from happening again? * The limitation and failure of R* to properly set monetary policy. * The limitation and failure of the Phillips Curve in setting policy. * The need for his colleagues, who are banking regulators, to follow all banking regulations in their personal lives, including proper disclosure to banks regarding mortgage applications. * Federal Reserve Vice-Chairman Lael Brainard, who was supporting and actively donating to the 2016 Hillary Campaign for President, and was "rewarded" by being on Clinton's short list to be Treasury Secretary. * Criticism of then Fed Chairman Janet Yellen hiking rates one time by 25 basis points in December 2015, then waiting a year for the second hike in December 2016 (could that have been to sway the election against Trump?). Then, proceeding under Trump's first term, they hiked rates so aggressively that they "broke things" by December 2018. Additionally, what was Brainard's role in this policy, and how much did her attempt to secure the candidate who would appoint her as Treasury Secretary contribute to it? * Staying silent as the immediate past NY Fed President, Bill Dudley, wrote an August 2019 Bloomberg op-ed openly suggesting that the Fed intentionally tank the economy to get Trump to lose the 2020 election. * Current Fed Chairman Jay Powell calling then Senator Mitt Romney (a famous never Trumper) in December 2020 to get him to vote against and actively sink the confirmation of Trump-nominated Fed Governor Judy Shelton. * Looking the other way when Fed Vice-Chairman Rich Clarida, Chairman Jay Powell, Richmond Fed President Barkin, and Atlanta Fed President Rafael Bostic engaged in several million dollars of stock and bond transactions in and around Fed meetings. Yet, when Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren did something similar, they were forced to resign. Why is the Fed allowed to selectively enforce such laws? --- Getting blunt again ... the Fed seems to be relishing in its role as a victim of an administration that wants to force change, not unlike what the Roosevelt and Carter administrations did in the past. NEC Chairman Keven Hassett said that the Fed—not Trump—has been the partisan actor. Examples of such Fed partisanship. * Williams' selective and directed criticism at one Fed Governor recently appointed by Trump, but ignoring all such criticism (detailed above) against anyone or anything else, sure looks like a partisan attack. * Silence about a Governor accused of breaking banking law sure looks like a partisan act. * Actively lobbying the Senate to vote against a Presidentially appointed nomination is a partisan act. * Lack of criticism as Fed Vice-Chairman favored and donated to a Presidential candidate, while voting for Fed policy that was beneficial to that candidate winning (refraining from a second hike), sure looks like a partisan act. * Staying silent when the previous New York Fed President wanted the Fed to purposely interfere in elections to favor a preferred candidate sure looks like a partisan act. * Selectively enforcing a personal trading ban looks partisan. --- Is the Fed under threat of losing some of its independence? Yes. Why? They have essentially done it to themselves and need to be reined in. The problem is that the Fed wants the status quo to continue, but it cannot stand any more. The Fed's partisanship, when it is supposed to be an independent organization, has become so severe that the Administration is being forced to intervene, which is not a good thing. The pendulum could swing too hard in the other direction. So, instead of the Fed acting like a victim of possible reforms and loss of independence, the Fed should reform itself and voluntarily clean house to show it can act responsibly as an independent actor. To date, not only have they been unable to do this, but they also cannot responsibly oversee the remodeling of a couple of buildings. --- Postscript: I have long said that I like Jay Powell and would reappoint him. I still stand by this seeming contradiction to what I wrote above. (Note that this is a moot point because Powell is not staying as Chairman.) The criticism above concerns the institutional problems at the Fed that appear to be so significant that no single Fed Chairman can address them alone. If so, and the institution does not want to reform itself, including NY Fed President Williams, who does not seem to be a willing participant in any such reform, then the only remedy is for the President and Congress to step in and do it.(Jim Bianco)