The Rhodes Center Podcast with Mark Blyth Independent from who exactly? Central banks and democracy (part two)
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Sep 26, 2025 Leah Downey, a political economist from King’s College London and author of "Our Money: Monetary Policy as if Democracy Matters," returns to explore the implications of recent Federal Reserve developments. She discusses how Trump targeted Fed leadership and what that means for presidential power. Leah weighs in on the debates surrounding quantitative easing and inequality. The conversation also delves into whether legislative reform is plausible, emphasizing the need for public discourse on monetary policy.
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Early Power Moves Against The Fed
- Trump moved to remove Michael Barr from the Fed's supervision role before inauguration and later forced Governor Kugler's quick resignation.
- He then publicly harassed and threatened to fire Fed officials to gain leverage over monetary policy.
Why The Board, Not Just The FOMC, Matters
- Control of the Fed's Board of Governors gives de facto control over key levers like interest on reserves, general counsel, bank president appointments, and swap lines.
- Securing a majority on the board is therefore a strategic route to shape monetary policy without formal legal changes.
Legal Gatekeeping Shapes Fed Action
- The Board hires the Fed's general counsel who can define what actions the Fed deems legal, shaping policy choices like bailouts and QE.
- That legal gatekeeping amplifies political leverage over monetary interventions beyond mere rate-setting.
