Yellen Faces Old Battles to Preserve Fed’s Independence

By Donna Borak
Federal Reserve Board Chair Janet Yellen is facing the first real test to her agency’s independence during her tenure, as House Republicans push a bill designed to broaden congressional oversight of the central bank and tie its hands regarding monetary policy. Since the Fed’s creation a century ago, it has had to fight to preserve itself from what it sees as congressional meddling and political influence. But Yellen faces a far more significant and specific threat under the GOP plan, which could gain additional momentum if the Republicans seize the Senate after the November elections. “This is a long-standing challenge for the Fed,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics Inc. “There’s always been a deep-seated populist distrust of the central bank. It’s the reason it took the country decades to establish one, despite financial crises. I think it’s fascinating at the Fed’s centenary just how alive that same sentiment is a hundred years later.”