Jackson Hole 2015 Weblogging:
The Federal Reserve was supposed to be a people's central bank. The desire to make it a people's central bank was behind the pre-World War I democratic progressive rejection of the Aldrich plan--written by John D. Rockefeller II's father-in-law Sen. Nelson Aldrich (R-RI). Instead of being run by bankers for bankers, the Federal Reserve was to be run by wise technocrats--the Board in Washington, with presidentially-appointed members with very long terms--to be distributed around the country in 12 reserve banks only one of which would be in New York, and the 9 directors the bank presidents served would have a solid majority representing their region's public and the Board, not representing bankers.
It hasn't really worked--although at least some officials of the Federal Reserve will occasionally say that the Federal Reserve is the North Atlantic central bank that is least close to the banking sector it regulates, and might hint that that is one of the reasons why the Federal Reserve has done better than other North Atlantic central banks since 2007.
Not only did Congress give the Federal Reserve a structure that is flawed, but Congress gave the Federal Reserve a mandate that is flawed: it places too high a weight on price-level stability rather than price-level predictability.
Not only did Congress give the Federal Reserve a flawed structure and a flawed mandate, but the target the Federal Reserve has adopted is flawed: even with the weight given to price stability, a 2%/year average inflation rate is too low a target to aim for for economic health.
Not only did Congress give the Fed a flawed structure and a flawed mandate, and not only is the Fed's 2%/year inflation target (rather than, say, a 4%/year inflation target or a 6%/year NGDP growth target) flawed, but the Federal Reserve's decisions are not a successful implementation of that target. Right now Wall Street is betting that the Federal Reserve will undershoot its target by a cumulative total of 5% over the next decade.