, the Federal Reserve system would be an independent agency, making a disinterested effort to analyze current economic conditions and carry out its operations in a way that would promote the long-term growth and stability of the economy. It was in order to promote this degree of independence that the terms of members of the Federal Reserve Board were so arranged that no one President would, in one term, be able to appoint a majority of the Board. Thus, it was hoped, the Board would be largely insulated from pressures originating in the White House.
In reality, however, the Federal Reserve Board is subject to political pressures. When the Fed chairman has been appointed by a particular Administration, he can be expected to be at least broadly in sympathy with the views of that Administration, and therefore broadly an ally. When a Fed chairman faces reappointment during a President's term -- or, in the case of a first-term President, during a prospective second term -- he will generally want to make himself reasonably popular with the incumbent Administration. The alternative, deliberate sabotage of the administration to ensure that the challenger wins the next election, is a very high-risk posture for a Fed chairman. Nevertheless, it has been alleged that Paul Volcker, Greenspan's predecessor, launched his aggressive war on inflation, driving interest rates to record levels, just as Jimmy Carter was approaching the 1980 election (Greider, 1987: 214-15).
In a longer-term sense, it may be argued that the Federal Reserve Board as a whole has a Republican bias. Federal Reserve Governors are bankers, and their professional lives are lived in contact with other bankers and the financial community as a whole. This is a largely Republican group. Moreover, Republican presidents have governed during twenty of the past twenty-four years, and twenty-eight of the last forty. Thus, most appointments of Federal Reserve Chairmen and ot...