A study by two prominent political scientists of the Federal Reserve’s position of power in the American state is much to be welcomed. As they note, not only the APSA’s 2005 report on Inequality and American Democracy (co-edited by one of the authors here), but even some of the most celebrated recent studies of the “American government’s lopsided favoritism of business and the superrich” (p. 34), have neglected the Fed’s role in this. Arguing that the Fed’s “administrative resources, independence, and mission were constructed and reshaped in reaction to financial crises, institutional self-interest to exploit opportunities for reinvention, pressures from well-connected banks and investors, and the shifting circumstances of the global economy” (p. 54), Jacobs and King contend that the Fed’s ever-more direct public interventions “became increasingly incongruous by the twenty-first century with its claims to independence and serving the public good, as opposed to serving Wall Street” (p. 89).

The book’s historical analysis along these dimensions is rather more informative for the early Fed, before it was a major player either domestically or internationally, than it is for the crucial decades after World War II, or even for the period marking the Fed’s ascendancy after the 1979 Volcker shock. While priding themselves on paying particular attention to the Fed’s development of “national and international administrative and monetary capacity” (p. 192), the polemical style of much of the argument renders the actual coverage of this rather thin in comparison with many other critical studies. To be fair, the book’s main concern is with the 2008 financial crisis and its aftermath. While Jacobs and King go out of their way to distance themselves from those “peddlers of goblins” (pp. 26–7) calling for the Fed’s abolition, the tone of their criticism is often equally harsh, from excoriating the Fed for its “cluelessness” in ignoring the warning signs before 2008 (p. 13) to calling the Fed’s “insulated decision-making” on quantitative easing afterwards nothing less than “diabolical” (p. 36).

In fact, it might be said that with the public transcripts of the monthly meetings of its Open Market Committee, the Fed is less secretive about differences among senior policy makers than any government department. Nor it is ever really clear why the Fed is especially singled out for blame, since it always acts in very close concert with the Treasury. The strong denunciation of the Fed here for having usurped the right to make fiscal policy through the practice of quantitative easing is rendered moot by the Treasury’s active encouragement of this, and Fed’s own lamentations about having to offset congessionally-imposed fiscal restraint.

Indeed, the very close collaboration of the Treasury and the Fed since the latter was created in 1913—crucially reinforced by their 1951 “Accord” and their mutually-supportive roles ever since in the making and reproduction of financialized capitalism—calls for a broader theory of the state, which would need to encompass but also go beyond the specific institutional make-up of the Fed itself. Jacobs and King also have little to offer on the political economy of financialized capitalism, treating finance merely as a self-serving interest group and retreading conventional nostrums on it undermining manufacturing, while ignoring how far industrial corporations rely on Wall Street’s financial services.

Despite often quoting many inflation-obsessed monetary hawks to sustain their criticisms, Jacobs and King themselves endorse the substance of the Fed’s quantitative easing, without which the effects of the crisis would have been much worse. In fact, given the very radical tone of their critique, the modesty of their “agenda for reform” is remarkable. They mainly want to restore the legitimacy of the Fed by distancing it from the direct influence of bankers which “fuels hostility across the ideological spectrum” (p. 183). Neither Bernie Sanders’ call for breaking up the banks too big to fail, nor Neel Kashiri’s even more radical proposal, as the president of the Minnesota Fed, for turning the large banks into public utilities, rate a mention. Jacobs and King’s call for “a broader set of informed perspectives on the Fed’s Board of Governors” and for the appointment of the head of the New York Fed from the White House seem particularly weak in light of their very harsh judgements of the Fed Reserve Chairs that heretofore had been appointed by successive presidents.

Rather than subjecting the Fed to more Congressional and judicial oversight, or dispersing authority across disparate agencies as Dodd-Frank tends to do, the agenda for reform here centers around calling for a new consolidated regulatory authority that would allow for “some degree of prudent independence for central bank decisions” (p. 185). Having at the outset invoked the constitutional wisdom of “inviting separate branches of government to obstruct, delay and block each other” as the basis for showing “how the Fed slipped Madison’s net accountability” (p. 11), the end of the book suddenly embraces Woodrow Wilson’s view that the system of checks and balances is “the most radical defect in our federal system” since it “fritters away useful powers . . . of marshalling authority and capacity for public purposes” (pp. 184–5).

Their model here is Canada, which is repeatedly praised for not having had to bail out its banks, even though it is admitted in a note at the end that “Canadian banks benefited from liquidity supplied by their government as well as some US support after 2008” (p. 236). For a book that claims to be above all concerned with bankers’ power, this admiration for my country is especially bewildering, given the overwhelming economic and political dominance of just five massive banks with intimate relations with the Bank of Canada from 1935 until today. The European Central Bank is also contrasted favourably with the Fed, despite its imposition of the most drastic austerity on democratically-elected governments. The ECB’s allegedly greater transparency than the Fed in terms of naming the banks from which it has purchased bonds is stressed, yet its complicity in hiding the massive liquidity the Fed directly provided, as the effective world central bank, to European banks in 2007 and 2008 is ignored, as is the extent to which the Fed’s quantitative-easing policies afterwards ensured that European banks would continue to obtain overnight loans from Wall Street. A classic case of missing the forest for the trees.