The Freeman Ideas on Liberty

O n average, Federal Reserve chairmen come and go at about the same rate as U.S. presidents. Dating from the creation of this country's central bank (1913), we have seen sixteen presidents (Wilson to Bush) and fourteen Federal Reserve Chairmen (Hamlin to Bernanke). The Fed Chairmanship, however, has seen more variation in years of service—Franklin D. Roosevelt notwithstanding. Spanning four presidencies, Alan Greenspan's reign (1987-2006) was the second longest. Greenspan was outdistanced (but only by a few months) by William McChesney Martin (1951-1970), who served five presidents. The first half-dozen Fed Chairmen belong to a different era—during which the primary locus of control on policy matters was the New York Federal Reserve Bank. It was that bank's Benjamin Strong and, following him, George Harrison who were key operatives during the late 1920s' expansion and the subsequent crash and descent into deep depression. And it was just as the economy was bottoming out that Congress passed legislation (in 1933 and 1935) which, among other things, shifted power to Washington. Though there is no Federal Reserve Bank in the nation's capital, the Eccles Building on Constitution Avenue, built in 1937 and now named for the seventh Fed Chairman, houses the Board of Governors and, most importantly, the Chairman of the Board. Like Marriner Eccles, the early and middle Fed Chairmen were not economists. Instead, they had backgrounds in law, banking, or finance. But starting with Arthur Burns (1970-1978) and allowing for one short gap of seventeen months, an economist has been at the top of this country's banking pyramid. A nearly unbroken reign of Economist-Chairmen—Burns, Volcker, Greenspan, and now Bernanke—has characterized modern Fed history. Having an economist at the top does not necessarily translate into better policy, but it does make the policy regime more understandable in terms of economic theory. The one short gap—between the Keynesian-oriented Burns and the monetarist-oriented Volcker—was bridged by the unlikely G. Appointed by President Carter and somehow confirmed by the Senate, Miller was a marine engineer turned lawyer. He was a long-time executive of Textron, Inc. and, on several occasions, had served the Carter administration in an advisory capacity. Clearly out of his element, Miller oversaw the acceleration phase of that period's double-digit inflation. Following established procedure for managing total bank reserves and hence deposit money, Miller and the other members of the board (plus some Reserve Bank Presidents) met about every month-and-a-half to set short-term …