Is the Federal Reserve Constitutional? An Originalist Argument for Independent Agencies

Abstract

Originalists have written off the Federal Reserve’s independent monetary policy decisions as an unconstitutional novelty. This Article demonstrates that the independent structure of the Federal Reserve dates back to a Founding-era agency known as the Sinking Fund Commission. Like the Federal Reserve, the Commission conducted open market purchases of U.S. securities with substantial independence from the President. The Commission’s independent structure was proposed by Alexander Hamilton, passed by the First Congress, and signed into law by President George Washington. Their decisions to create an independent Commission with multiple members to check the President and one another — and to include the Vice President and Chief Justice as Commissioners who could not be replaced or removed by the President — belie the notion that such independence violated the newly minted Constitution. The Sinking Fund Commission establishes that the Federal Reserve’s independent structure has an impeccable originalist provenance and does not violate the Constitution.