Bernanke and Co like to assert that any audit or oversight would completely eliminate the mythical independence of the Federal Reserve. According to them, the only way reason we have the successful economy we do is because people trust the Fed’s independence to allow them to act without political influence.
While it is easy to see that this supposed freedom from political influence is a blatant lie, it is amazing that these people don’t understand that indepence from oversight isn’t something that comes automatically in our system of government.
But the fact of the matter is that, in any well-functioning democracy, independence is earned based on credible and ultimately successful actions – not granted for all time and without conditions.
A good example, I feel, of independence is Naval Reactors. Operationally exempt from oversight by the Nuclear Regulatory Commission, Naval Reactors has the longest and most impressive track record of nuclear operations in the world. With more EFPH of reactor operation without accident than the rest of the world combined, NR has proven that it can do its job without oversight.
The Fed, on the other hand, has not had such an illustrious track record. From what history has shown us, the political influence that Bernanke seeks to prevent already exists. Perhaps he’s just afraid of the scope of that influence becoming more publicly known.