President Trump's public criticism of the Fed isn't new. But in its second term, the Trump

administration is preparing to turn words into action. It's setting in motion a challenge to the

precedent that has long prevented presidents from firing officials of independent agencies

without cause. So is the Fed's independence in jeopardy? And how much independence should the Fed have

anyway? I'm Alison Nathan and this is Goldman Sachs exchanges. Each month I speak with investors,

policymakers, and academics about the most pressing market-moving issues for our top-of-mind report

from Goldman Sachs research. I recently spoke with former Fed Vice Chair Richard Clareda

and the Hoover Institution's John Cochran

about the independence question.

I started by asking Clarita

what Fed independence really means.

Congress created the Fed as what we call an independent agency

in 1913 and attended it for it to have a degree

of independence. How so? First Federal Reserve governors have 14-year terms and they are appointed

on a staggered basis so that governor terms come up only once every two years. The idea being

originally that it would be difficult for any one

president to appoint an entire board. Secondly, Federal Reserve governors can only be removed

for cause, and four cause has been interpreted by the Supreme Court as malfeasas, neglect,

or dereliction of duty.

So essentially, the Congress intended for Fed officials not to be fired by the president solely

because he disagreed with their economic policy.

And importantly, that was actually upheld by the Supreme Court in 1935.

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