Supreme Court appears to carve out a murky exception for the Federal Reserve

1/23/2026 at 8:23:16 PM

This is the key point but the article somewhat misapprehends it:

> With the Federal Reserve, however, the Supreme Court’s conservative justices have applied a different view: that the Fed’s monetary policy — the setting of short-term interest rates and management of the money supply — historically hasn’t been overseen by the executive branch

More precisely, setting interest rates isn’t an “executive power.” Article II says: “The executive Power shall be vested in a President of the United States of America.” So the question is whether the Fed is exercising the executive power.

The Fed doesn’t set interest rates as a government agency ordering private actors to do what the government says. Instead, it acts as a private market participant to influence the behavior of the private banks that transact with it: https://www.stlouisfed.org/in-plain-english/the-fed-implemen...

In this core rate-setting function, the Fed doesn’t have to be a government agency at all. This core rate setting function doesn’t involve prosecuting people, creating regulations with the force of law, or otherwise using the coercive power of government to control private conduct. The fed does some of these things through banking regulations, but they’re ancillary to this rate setting function. You could spin those functions off into a government agency subject to presidential control without affecting the independence of the core rate setting function.

by rayiner

1/23/2026 at 7:51:43 PM

Fun fact: the Chinese central bank is not at all independent, but one-party rule prevents monetary policy from becoming incoherent as a result of short-term political interests tied to the election cycle.

An independent central bank fixes this in a democracy, but now it can exert considerable influence over political outcomes.

Consider that Carter was punished by the public in his re-election campaign for a recession which was ostensibly caused by Federal Reserve policy choices which ultimately benefited Reagan.

by xeckr

1/23/2026 at 8:20:23 PM

The "historical tradition" justification for rulings the Supreme Court seems to favor in recent years when determining if something is constitutional is fascinating. Presumably this court would have ruled that the original Bank of the United States was unconstitutional since it had no "tradition" of existence at that point in time. I guess new traditions were made unconstitutional around 1850 and the existing ones were grandfathered in.

by csb6

1/23/2026 at 8:24:37 PM

What’s unusual about it? A bunch of guys wrote a document with rules. What they did and did not do after establishing those rules is pretty relevant to understanding what the rules mean, right?

Say Linus Torvolds wrote legally binding rules for the design of the Linux kernel. How he designed the Linux kernel after writing those rules would be quite relevant to what the rules mean, right?

by rayiner

1/23/2026 at 9:15:22 PM

Any person in power might violate the rules and just because they happened to be one of the people who helped write them doesn't mean they wouldn't violate them. In fact, they would be more likely to get away with bending the rules due to being one of the people who made the rules.

by csb6

1/23/2026 at 10:15:21 PM

That’s possibly true, but it’s usually not a helpful argument. The historical analysis typically is used to define the exception to a clear textual rule.

Here, the first sentence of Article II says: “The executive Power shall be vested in a President of the United States of America.”

You can say this isn’t a categorical dictate and there’s exceptions. One way to support that is by saying the founders created an independent central bank immediately, so they thought it wasn’t covered by this rule. But as you recognize, the founders could have just been breaking the rule. But that leads you to the conclusion that the central bank isn’t permissible.

by rayiner

1/23/2026 at 11:33:41 PM

> But that leads you to the conclusion that the central bank isn’t permissible.

The court could have just as easily have cited Framers that opposed the creation of the Bank as evidence the Constitution did not permit it. Or cited Jackson's strong opposition to the Bank as an example of there being a tradition of the executive taking control of monetary policy. My point is that the historical argument is arbitrary; you can pick and choose which examples get to be considered part of the canonical tradition to support preconceived conclusions (e.g. "the President shouldn't be allowed to interfere with an independent agency (the Fed)" or "the President should be allowed to interfere with an independent agency (the FTC)").

by csb6

1/23/2026 at 7:24:17 PM

>Peter Conti-Brown, a professor of financial regulation at the University of Pennsylvania, added, “I’ll say as a legal scholar and as a historian I think that differentiation is hocus pocus.”

I'm willing to bet that the "hocus pocus" is the Court not wanting financial markets to get upended by giving the president the ability to fire Fed governors even if this is contradictory to previous decisions of theirs.

by GenerWork

1/23/2026 at 8:42:54 PM

The differentiation is because the U.S. had a central bank in 1791, almost a century before any independent agencies were created.

by rayiner