The Senate confirmed Stephen Miran to the Federal Reserve Board on Monday. Critics of Miran’s nomination argued that his prior service at the Treasury Department and on the Council of Economic Advisers made him too political for the job. Putting Miran on the Board, they warn, will weaken the Fed’s independence.
Whatever one may think about Miran, it is difficult to argue that his prior service in the Executive branch disqualifies him from serving on the Fed Board. Throughout its history, presidents of both parties have often nominated individuals for the Federal Reserve Board who had previously served in political roles. Nor is his likely return to the executive branch unusual. Indeed, one might argue Miran’s nomination fits squarely within tradition. Let’s briefly review the history.
Marriner Eccles provides an example of how an ostensibly political appointment can work out well. Before Franklin D. Roosevelt nominated him to chair the Federal Reserve in 1934, Eccles served as an assistant to Treasury Secretary Henry Morgenthau. A vocal supporter of Roosevelt’s New Deal, he testified before Congress in 1933 in favor of policies that soon became central to the administration’s program.
Roosevelt may have expected Eccles to be his man at the Fed. But Eccles would go on to play an instrumental role in the Banking Act of 1935, which — together with the Fed–Treasury Accord of 1951 — laid the foundations of the Fed’s modern independence. Indeed, his influence was so enduring that the Federal Reserve’s headquarters was renamed in his honor in 1982.
Arthur Burns provides a less favorable example. Before Richard Nixon tapped him to lead the Federal Reserve in 1970, Burns had served as chair of the Council of Economic Advisers under Dwight Eisenhower from 1953 to 1956 and later as a counselor to Nixon. After his tenure at the Fed, Burns served as a member of Ronald Reagan’s Policy Advisory Board.
Burns’s close political ties to Nixon were well known when he was nominated, yet they did not prevent him from being confirmed to head the central bank. Perhaps it would have been better if Burns had not been confirmed. While at the Fed, he faced pressure from Nixon. Burns caved, inflation soared, and Americans suffered.
But Burns is the outlier. Most modern central bank chairs have spent time working for the president, and those political ties are not generally thought to have undermined central bank independence.
Alan Greenspan served as chair of the Council of Economic Advisers under Gerald Ford from 1974 to 1977. A few years later, Reagan appointed him to chair the National Commission on Social Security Reform and to serve on his Policy Advisory Board. Greenspan was confirmed for the top spot at the Fed in 1987. He was subsequently reappointed by George H. W. Bush, Bill Clinton, and George W. Bush.
It would be hard to argue that Greenspan compromised the Fed’s independence. Most economists believe he was a highly competent central banker who deserves much credit for continuing the Great Moderation.
Ben Bernanke provides another case in point. He served as a governor on the Federal Reserve Board between 2002 and 2005 and as chair from 2006 to 2014. What did Bernanke do in the interim? He served as chair of Bush’s Council of Economic Advisers. Like Greenspan, Bernanke was reappointed by the subsequent administration. His earlier political role was not viewed as a threat to the Fed’s independence.
Like Bernanke, Janet Yellen spent time advising the president between stints at the Fed. She was nominated by Bill Clinton to serve as a governor from 1994 to 1997, and then chaired Clinton’s Council of Economic Advisors from 1997 to 1999. Yellen served as president of the San Francisco Fed from 2004 to 2010. Barack Obama nominated her for a Board seat in 2010 and promoted her to chair in 2014. She would later serve as Treasury Secretary under Joe Biden. Yellen passed through the revolving door between the Fed and the executive branch more than anyone else. And yet, she was not generally considered a threat to central bank independence.
Taken together, these examples show that prior service in political roles has never been a barrier to appointment at the Federal Reserve. From Eccles to Yellen, presidents of both parties have consistently turned to individuals who had worked at the Treasury, the Council of Economic Advisers, or directly in the White House. The historical record makes clear that political experience has often preceded service at the Fed’s highest levels. And many have gone on to work in the executive branch after spending time at the Fed.
Against this backdrop, the objections to Miran’s confirmation seem overstated. Unlike Eccles, Greenspan, Bernanke, or Yellen, who went on to serve as chair for years (and in Greenspan’s case nearly two decades), Miran has only been confirmed to fill the remaining four months of an unexpired term. Whatever one thinks of his policy views, it is difficult to see how such a brief tenure as a mere governor will threaten the Fed’s institutional independence.
By historical standards, Miran’s nomination is far from extraordinary. To treat it otherwise risks confusing the Fed’s independence from politics with insulation from the normal process of presidential appointments.