Fed Independence Earned Through Actions, Not Law
Newly confirmed Federal Reserve chairman Kevin Warsh made a significant statement during his Congressional testimony on July 14. He said that 'Fed independence' is not something that is conferred by law, but rather it is earned through actions.
Warsh's observation highlighted the importance of the Fed's political independence for monetary policy. The Federal Reserve Act established staggered terms for seven Fed governors at 14 years and set up 12 regional banks to insulate the Fed from short-term political interference.
The chairman's statement was seen as a commitment to fighting for the Fed's independence by taking appropriate monetary policy actions. Warsh's comment also drew a biblical parallel, with the writer noting that good works are necessary to confirm the change wrought by salvation.