Abstract: The Federal Reserve’s governance structure is outdated and inadequate for ensuring that the Fed serves the public interest. In this paper, we examine the case for making the Fed fully public (“why”), and then we consider specific proposals for doing so (“how”). Our analysis indicates that pragmatic and nonpartisan reforms can strengthen the Federal Reserve’s governance while enhancing its operational independence to pursue its statutory mandate without political interference. In particular, the Fed should be a fully public institution whose decision-makers are selected by open and transparent processes; indeed, we find that making the Fed fully public also yields significant benefits for American taxpayers. Moreover, the Fed should be held to the same standards of transparency and accountability as every other public agency, including comprehensive annual reviews by the Government Accountability Office (GAO) and applicability of the Freedom of Information Act (FOIA) to all aspects of the Fed’s procedures and operations.Like the Bank of England that was nationalized in 1946 after having been private since its inception in 1694, the Fed, founded in 1913 as public-private partnership, should be made fully public (nationalized) in order to both eliminate the rampant confusion and also remove the appearance of conflicts of interest.
Making the Federal Reserve Fully Public: Why and How
Jordan Haedtler, Andrew Levin, and Valerie Wilson
Economic Policy Institute, August 2016