Steve Mnuchin Defends the Myth of Fed Independence

One of the biggest surprises during Donald Trump’s unconventional presidential campaign was his frequent criticism of the Federal Reserve. Though he was highly inconsistent on what he thought the Fed should do, coming out as both a critic and advocate of the current low interest rate policy, he was steadier in his dismissal of the Fed as an independent institution. During one of the debates, he went as far as to accuse Fed Chairwoman Janet Yellen of ‘being…more political than Hillary Clinton.’
While it is possible Donald Trump may still believe this, it is clear his Treasury Secretary does not.
Responding in writing to questions from Senator Bill Nelson, Steve Mnuchin described the Fed as ‘organized with sufficient independence to conduct monetary policy and open market operations.’ He also praised ‘the increased transparency we have seen from the Federal Reserve Board over recent years.’
While Mnuchin’s response does not explicitly criticize the movement to Audit the Fed, the leading critics of the effort have always pointed to the Fed’s independence as a primary reason for their opposition. They faithfully parrot the same line offered by Chairwoman Yellen and her predecessor that a GAO audit of their operations would allow partisan politics to interfere with the judgement of the Federal Reserve.

This post was published at Ludwig von Mises Institute on January 26, 2017.