Explicitly politicizing the Fed

Via the Cunning Realist is a disturbing story that I was hoping I would not see with Greenspan now on the memoir circuit.

White House officials have told us that President Bush intervened forcibly to convince an initially reluctant Federal Reserve to reduce interest rates. "There were some telephone calls from the White House to the Fed in which some very crude language was used."

The Fed's independence is an important fig leaf if the US does not want to be perceived to be a banana republic by our creditors. This is not that big of a surprise given the politicization of the rest of the government, but still it is a disappointment.