The Supreme Court’s decisions today on the presidential firing power look poised to lock the president out of monetary policy — and reform. The high court held in one case that the president can fire for any reason most executive branch officials, including a board member of the Federal Trade Commission. Yet the Nine found, too, that a Federal Reserve Board governor, Lisa Cook, could only be terminated for cause — but not for unwanted monetary policy.Chief Justice Roberts, writing for the majority, turns to the historical record to give America’s central bank a status that does not apply to other executive branch agencies. Fed independence, he cavils, citing an earlier precedent, is a “special arrangement sanctioned by history,” analogous to the two 19th century Banks of the United States. Yet those banks were not arms of the federal government, even if Uncle Sam had a stake in their ownership. Chief Justice Roberts points to Hamilton’s call in 1791 for the First Bank of the United States to “be under a private not a public Direction.” This structure, per Hamilton, meant that it would avoid “the temptations of momentary exigencies.” Yet that bank’s charter lapsed in 1811. Debate soon arose in Congress over whether to revive it. Congressman Daniel Webster warned that such a bank posed a threat to honest money and fiscal probity. *“What sort of an institution, Sir, is this?” Webster asked. “It looks less like a bank than a department of government. It will be properly the paper-money department.” Webster foresaw that for what would become the Second Bank of the United States, “its capital is government debts,” and “the amount of its issues” — meaning paper money — “will depend on government necessities.” The “government, in effect, absolves itself from its own debts.”Sound familiar? Congress backed the Second Bank anyway, only for it to meet its nemesis in President Jackson. Old Hickory, in some ways downright Trumpian, decried the elitism of the bank. He grasped that gold and silver were the only constitutional forms of currency. Jackson vetoed the bank’s renewal, warning it would never be “compatible with justice, with sound policy, or with the Constitution of our country.” Jackson’s criticisms echoed Webster’s concerns at the Second Bank’s founding. The debate over the Second Bank raged at a time when the traditional idea of money as specie — gold or silver — was being engulfed by a rising tide of paper notes. “Money per se was giving way to promises to pay money, most of which were never performed,” historian Bray Hammond writes. Jackson’s bank victory settled the monetary debate for generations. Does that history suggest the need for an autonomous central bank? Chief Justice Roberts blames “Jackson’s crusade” for “ruinous financial panics” in “1837, 1857, 1873, 1893, and 1907.” Yet these were part of a cycle of booms and busts in America’s rise to economic dominance. The growth, under the gold standard, came with average inflation of 0.2 percent a year between 1790 and 1913. The Fed’s track record, by contrast, vindicates Webster’s worries. This history makes it hard to avoid Justice Neil Gorsuch’s foresight in his concurrence to today’s FTC ruling. He suggests that the decision is incomplete and “from here, the only sure path is to finish the journey we start today and restore legislative and judicial powers to where they belong: in Congress and the courts.” These include the federal monetary powers. As Justice Gorsuch puts it: “It is time to return, all the way, to the Constitution.”_______* Though Webster would go on to represent the Second Bank before the Supreme Court in McCulloch v. Maryland.
