The struggle over the Federal Reserve is usually described as a dispute about central bank independence. That description is too narrow. The deeper issue is whether the power to create money, one of the most consequential powers in a modern polity, belongs to the people’s legislature or may be subordinated to presidential control. That question reaches to the core of democratic sovereignty.
The Federal Reserve is often treated as one more independent regulatory agency among many. Once placed in that category, it seems natural to ask whether it should stand or fall with other agencies under the logic of the unitary executive. But the Fed is not simply another regulator. Congress established the Federal Reserve System to carry out a distinctive legislative prerogative: making the sovereign money supply. The institution’s constitutional stature follows from that task. Congress used an institutional form, national banking, that had been developed precisely to secure sovereign money-making from executive, originally monarchical, interference.
Modern central banking began in England as a way to lever power from a king’s grasp into the legislature’s hands. For centuries, monarchs had controlled coinage through the mint. That power was politically potent. A ruler who could alter the money supply could spend without relying on the legislature and weaken legislative control over taxation, the legislature’s most important check on sweeping monarchical authority. Parliament’s answer was to establish a national bank that could create a new flow of money according to legislative design rather than royal will. The point was not merely financial convenience. The point was constitutional. Money-making became a crucial route by which Parliament secured its governing authority against executive encroachment.
The American story followed the same logic in changing forms. Colonial assemblies claimed the authority to issue paper currencies, displacing imperial officials from the center of economic power. At the founding, the framers located authority over money creation, debt, taxation, and finance in Congress’s hands. In the decades that followed, the federal legislature controlled the issue of sovereign money through national banks, Treasury notes, greenbacks, nationally chartered banks, and eventually the Federal Reserve. Congress structured each form to maintain legislative authority over the money supply. The pattern was not linear or uncontested. But it was unmistakable. Legislatures repeatedly claimed control over money-making in order to make effective their power to act for those they represented.
My new INET working paper argues that the Federal Reserve should be understood not as an ordinary independent agency, but as the institutional expression of Congress’s prerogative to make money.
That feature has largely disappeared from current doctrine. Unitary executive theory tends to flatten the separation of powers into a simple binary: Congress legislates, the president executes. On that account, the administrative field appears relatively homogeneous, and presidential control—effectuated by capacious authority to remove key decision-makers—becomes the default. But that picture misses the hard-won architecture of democratic government. Legislative sovereignty does not reduce to formal lawmaking. It is ringed by prerogatives that protect the legislature’s ability to govern in the people’s name. Money-making is one of the most closely held of those prerogatives.
The point is backed by democratic theory. Money is not a neutral instrument. It is a mode of organizing value, mobilizing resources, and sustaining the legal economy. Governments create money by issuing promises of value and taking those promises back in payment. In a democracy, that means the representatives of the people are directing resources outward and obligating the community in return. The authority to incur debt on behalf of the polity allows the legislature to create money out of that debt. The act is not incidental to sovereignty. It is one of the ways sovereignty becomes operational.
The very structure of the Federal Reserve preserves that allocation of authority. Congress designed the Fed as a central bank because that banked architecture allowed money to be created according to legislative parameters while confining one-off political interventions. According to the design, Congress specifies a process that the Federal Reserve as a third-party agent will use to create money. Today’s Fed is a complicated institution, split between implementation assigned to the regional Reserve banks and management assigned to the Board of Governors and the Federal Open Markets Committee to ensure public control. But the institution acts as a whole to create a supply of sovereign money while the legislative authority sets the terms of operation.
In short, the process of money creation uses a third-party institutional form to keep the executive from commandeering the process. As Paul Tucker, former deputy governor of the Bank of England puts it, “an independent monetary authority is a means to underpinning the separation of powers … . The regime is derivative of the higher-level constitutional structure and the values behind it.” [Unelected Power, p. 289]
The Fed’s basic capacities—setting monetary policy, acting as lender-of-last-resort, and coordinating payments—all follow from its money-creative power. So too, in a functional sense, do the regulatory and supervisory tools that shape credit expansion and financial stability. The broader money supply does not simply follow from the monetary base. It depends on the institutional and supervisory framework governing commercial bank lending. Stripping those managerial tools away would distort Congress’s design for money creation itself.
The statutory framework of the Fed underscores the point. Congress specified the places where the executive could participate: appointments, certain defined interactions with Treasury, and particular emergency lending procedures. Those provisions mark the reach of executive authority by making it explicit. Congress’s decision to draw boundaries for the executive role negates the argument that the president has more general power over the institution. To infer such a power would not merely revise the Federal Reserve Act. It would subvert the constitutional logic that underlies it. Congress established the Fed to deploy its money-creative powers while limiting executive domination over that function.
The present constitutional conflict arises because the Supreme Court’s embrace of unitary executive theory now threatens to reach the Fed. Even the justices appear uneasy at the result. The central bank is problematic for a jurisprudence that assumes presidential control over a relatively uniform regulatory field. But that discomfort points to the problem in the doctrine, not in the institution. The case of the Fed exposes the separation of powers as a more complicated project than current theory allows. Legislatures built democratic sovereignty by struggling for prerogatives that protected their lawmaking authority. The Court dismantles democratic sovereignty when it denies the reach of those prerogatives.
The standard prudential defense of central bank independence, that politicians cannot be trusted with the printing press, is not wrong. But it is secondary. The deeper argument is constitutional. Democratic theory, constitutional text, and the long history of legislative struggle all point toward the same conclusion: money-making in its very design must flow from the people’s immediate representatives. If the executive could dominate the central bank, the danger would not be confined to inflation. It would reach the deeper possibility that money creation could be directed to reward allies, reshape markets, and hollow out the distribution of powers that democratic government depends on.
The stakes extend beyond the Fed. Money-making is only one legislative prerogative among others. The same constitutional rupture appears, for example, when the executive claims sweeping authority over information held across government. That contention subverts the authority that Congress must have to acquire the information it needs to write sound laws. The broader point is that democratic governance depends on a network of prerogatives, some express, some implicit, all of them built through institutional struggle. When those are forgotten, government is collapsed into an artificial construct and democratic sovereignty begins to erode.
The power to make money is the power to rule. In a representative system, that authority cannot simply be absorbed into presidential control without altering the constitutional order itself. The fight over the Federal Reserve therefore concerns more than one institution. It asks whether the constitutional architecture of democratic sovereignty still has force or whether one of its most essential prerogatives will be surrendered in the name of executive uniformity.
Christine Desan is the Leo Gottlieb Professor of Law at Harvard Law School, where she teaches about money as a legal institution, the international monetary system, constitutional law, and the political economy of capitalism. She is grateful to Pia Malaney for assistance on this post.
