Peter Conti-Brown, a lawyer who teaches ethics at the Wharton School of Business, examines the structure and governance of the Federal Reserve in this aptly named volume. He contends that scholarship on the central bank has focused too much on monetary policy itself, neglecting questions of organization that have considerable impact on policy. This approach has much to recommend it, but an early omission raised questions in my mind about execution. In the introduction, Conti-Brown asserts, “Historians . . . have essentially ignored all but its [the Fed's] creation in 1913” (p. xii). As a historian who has written a book on the Federal Reserve in the 1970s, I found this statement annoying, particularly since my book did not appear in his bibliography. Of course, one omission is no reason to condemn an entire book, provided it does not represent a broader pattern.

Conti-Brown begins with a good discussion of the complex structure of the Federal Reserve and its historical evolution. The organization of the Fed in 1913, its reorganization in the 1930s, and the renegotiation of its relationship with the Treasury in 1951 all receive attention, as do the Fed's regional banks, the central Federal Reserve Board, and the central bank's various policy committees, of which the Open Market Committee is by the far the most important. He then examines the central bank's vaunted independence and poses the inevitable question: Independent from whom, and to what end? The object of this independence, he contends, is to prevent politicians from inflating the currency to secure short-term economic (and electoral) gains, thereby storing up problems for the future. Though supportive of the basic reasoning behind independence, the author points out that it is relative because Congress and the Executive often try to shape monetary policy, that other groups (like bankers) have influence on the central bank, and that with respect to financial regulation, the Fed's independence is irrelevant. These observations are true, but they will not surprise serious students of the central bank. For instance, Conti-Brown points to the influence wielded by economists on the staff of the central bank, concluding, “There is no denying that the problems of Fed policy are seen as problems of economics” (p. 93). Has anyone ever thought otherwise? Professional economists probably have increased their influence at the central bank over the last fifty years, but they have never been absent, and the institution's leaders have always framed issues in economic terms. More broadly, the author's discovery that the Fed's staff wields considerable influence, and that these people sometimes have their own agenda, will not surprise anyone acquainted with the workings of government. Nor will Conti-Brown's observations that the central bank cultivates bankers as a source of political support come as a revelation—almost every government agency that can develops relationships with powerful interests to defend and, ideally, strengthen its political position. The Department of Agriculture works with farm groups, the Department of Education with teachers’ organizations, and the Fed with bankers.

A lack of originality does not render a volume useless. What is elementary to scholars is not necessarily so to the general public, and a careful study of the Fed's workings might be a useful primer for outsiders. Unfortunately, The Power and Independence of the Federal Reserve contains errors that compromise its utility as either scholarship or a primer. For instance, Conti-Brown asserts that the Treasury and the Fed failed to prevent the bankruptcy of Lehman Brothers in 2008 because the central bank's attorneys insisted the Fed lacked the authority to do so. Lehman's collapse was a turning point in the financial crisis of that year, touching off a full-fledged banking panic. During 2008, however, the Fed worked with the Treasury to rescue Bear Stearns, Fannie Mae, Freddy Mac, and AIG, the salvage of which presented legal challenges equal to or greater than a rescue of Lehman. They failed to save Lehman not because they lacked legal authority, but because their rescue of Bear Stearns several months earlier had sparked an intense public and congressional backlash, prompting the Fed and the Treasury to promise that they would not do anything similar again. Moreover, the Fed and the Treasury clearly underestimated the fallout from Lehman's collapse. The legal excuses the Treasury and the Fed cited were exactly that—excuses. Only after it was clear that the entire financial system was teetering on the edge of collapse did they spring back into action. Such is the conclusion of Barry Eichengreen's study of the 2008 crisis, Hall of Mirrors (2015), which examines the subject in far more detail than Conti-Brown's book. Lawyers do play an important role at the Fed, but it is to figure out how the central bank can act, not to limit its actions.

Conti-Brown's forays into the monetary policy of the 1970s—my specialty—display greater errors. He suggests that Richard Nixon secured the monetary policy he desired by bullying Fed chairman Arthur Burns, whom Nixon had appointed. To support the point, Conti-Brown reproduces a long entry from Burns's diary that, according to Conti-Brown, came “late in the President's second term, as scandal and political crisis fell down on Nixon” (p. 194). In this entry, Burns recounts how, in a meeting with Nixon, he emphasized to the president the importance of cooperation between the White House and the central bank and professed his support for Nixon. This conversation, however, occurred in 1971, eighteen months before Nixon's landslide reelection, not during the Watergate scandal. For several months, Burns had been publicly urging Nixon to adopt an “incomes policy”—intervening directly to limit increases in wages and prices—which the president was reluctant to do. In a fit of pique, the administration had launched an ugly, personal attack on Burns using press leaks. The exchange Conti-Brown cites came after Burns had extracted from Nixon what was, in effect, a public apology, and Burns's objective was to make peace while pushing the president to adopt an incomes policy—which Nixon did several months later, when he imposed wage-price controls. What appears to be a pledge of loyalty was, in fact, part of Burns's ultimately successful campaign to influence Nixon. Had Conti-Brown consulted the literature or even read the notes in the published version of Burns's diary, he would have known that. Why he thought this quote was from 1973 or 1974 is unclear—1971 is printed in bold at the top of the page of Burns's diary (Inside the Nixon Administration, pp. 39–40). More typical of Burns's dealings with Nixon during the Watergate crisis was his refusal to lobby his many contacts in the House of Representatives against impeachment (Nixon Administration, p. 132).

Conti-Brown also claims that monetarism and monetary targeting were “anathema to the Nixon, Ford, and Carter administrations” (p. 234). With respect to Nixon and Ford, this statement is completely wrong. They embraced monetary targeting, which was a subject of constant discussion within the Nixon administration, and under Burns, the Fed began to take monetary aggregates into account when setting policy. Milton Friedman, the high priest of monetarism, had considerable influence with the Nixon administration—he was a personal friend of both Burns and George Shultz, who was probably Nixon's most important economic advisor. During the Ford administration, the Fed focused on monetary targets, raising rates when monetary aggregates overshot and cutting rates when they fell short—all with Ford's support. The main studies on economic policy during this period—mine, Economist in an Uncertain World (1994), James Reichley's Conservatives in an Age of Change (1981), Herbert Stein's Presidential Economics (1994), and Allen Matusow's Nixon's Economy (1998)—contain this information. Unfortunately, none of these books appear in Conti-Brown's bibliography. Confronted with so many errors in my own field of expertise, I cannot but think that comparable mistakes exist elsewhere, where my knowledge is less complete.

Conti-Brown's errors extend to broader issues that anyone with expertise in finance should understand. He insists, “Post–World War II governments sought to restore a version of it [the gold standard] again” (p. 210). Such was not the case. The Bretton Woods system established after the war did have a place for gold, but its object was to reconcile the chief benefit of the gold standard—stable exchange rates—with flexible domestic monetary policies, which the gold standard effectively precluded. It was essentially different from the gold standard, as partisans of the latter, like Charles de Gaulle, recognized. Conti-Brown claims, “Historically, it was international coordination that exacerbated the Great Depression” (p. 230). The international effort to reconstruct the gold standard in the 1920s did introduce dangerous weaknesses into the world's financial system, but once disaster struck, coordination collapsed. As Eichengreen writes, “In an atmosphere poisoned by mutual distrust, banks and government sleepwalked together into disaster” (Hall of Mirrors, p. 147). As Austria, Germany, and Britain slid into crisis in 1931, no common, international effort was made to contain problems that, with each failure to act, became that much more severe. The French adamantly refused to dip into their substantial gold reserve to assist any of those in trouble, insisting that the affected countries needed to balance their budgets and raise interest rates; while the Americans were not quite so adamant, domestic opposition meant that the only meaningful U.S. initiative was President Herbert Hoover's moratorium on repayment of government debt. Concerted action at the outset of the international crisis, when Austria was on the verge of collapse, might have prevented disaster, or at least contained problems. Conti-Brown asserts that before World War I, central banks guaranteed payment of bills of exchange (really acceptances, a species of the bill of exchange), thereby facilitating the extension of such credits for trade (p. 212). In fact, private banks (in Britain, firms like Barings, Rothschild's, and Hambros) guaranteed acceptances. The central bank provided liquidity, purchasing acceptances offered by these banks for its own portfolio.

In the most arresting part of The Power and Independence of the Federal Reserve, Conti-Brown asserts that “the Fed is outside the constitutional framework entirely” because, “as presently designed, the Reserve Banks are almost certainly unconstitutional” (pp. 106–7). The presidents of these institutions, he claims, are not appointed according to court-created rules for independent federal agencies such as the Federal Trade Commission or the Federal Communications Commission, which require that those with decision-making authority be either presidential appointees or the appointees of presidential appointees. Yet legally, the regional Federal Reserve Banks are federally chartered corporations like the national banks, Fannie Mae, and the Smithsonian. Banks in their member districts own the regional Federal Reserve Banks. These organizations are not arms of the federal bureaucracy. The regional banks are much like the Bank of the United States, which Alexander Hamilton organized in 1791 and the Supreme Court approved in the McCulloch v. Maryland decision, written by Chief Justice John Marshall. To assert that this arrangement is “almost certainly unconstitutional” is ridiculous. The judiciary does sometimes change the rules, and it might conceivably do so for the reserve banks. Yet as Conti-Brown admits, the courts have been reluctant to hear such challenges. The whole issue is something of a red herring, a distraction from the question of whether the Fed has the optimal structure—a subject on which Conti-Brown has some intelligent observations.

Like finance, scholarship depends on credibility. Readers must be confident that scholars are being careful with the facts. The many sloppy errors and careless misstatements in The Power and Independence of the Federal Reserve mean that readers cannot have confidence in it.