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The Fed, the Supreme Court, and Their Legitimacy

The government’s least democratic branches are incompetent and corrupt because they are unaccountable. James Madison would not be surprised…

Graeme Sloan/Sipa USA via AP Images

The Revolving Door Project, a Prospect partner, scrutinizes the executive branch and presidential power. Follow them at

On Friday, the Federal Reserve released a thorough report documenting how, ahead of the crash of Silicon Valley Bank, its bank supervisors failed to notice obvious warning signs, and were prevented by their bosses from acting on what they did spot. As the Prospect’s David Dayen wrote, the Fed effectively publicized to the world its incompetence and disinterest in the basic work of regulation.

“As the head of the government agency responsible for supervising SVB, [Federal Reserve Chair Jerome] Powell bears responsibility for the oversight failures that precipitated its collapse,” Nobel Prize-winning economist Joseph Stiglitz wrote at Project Syndicate last week.

Meanwhile, ProPublica’s three reports on Supreme Court Justice Clarence Thomas’s extravagant gifts from right-wing billionaire Harlan Crow have inspired other reporting on ethics failures from the other Court conservatives, including Chief Justice John Roberts. Senate Judiciary Committee Chair Dick Durbin called for Roberts to testify about the Court’s ethics regime, an invitation that Roberts point-blank refused, thumbing his nose at a co-equal branch of government. The Court destroyed Americans’ right to reproductive autonomy last year under nonsensical pretenses, and now has its sights trained on student debt relief under self-refuting arguments.

The Fed and the Court are the two least democratic, and arguably most powerful, branches of the federal government today. In both, we see demonstrations of one of America’s founding principles: Unchecked power wielded by unelected rulers breeds corruption, and ultimately, tyranny. The Fed is not there yet, but the Court certainly is. It is past time for our actually elected leaders, including President Biden, to say so.

Both the Fed and the Court have demonstrated material sloppiness at the basic functions of their institutions—the Fed through its regulatory failings, the Court through its nonsense arguments. Neither Powell nor Roberts was chosen by the American people. Both have low public approval.

To be sure, the depth and style of rot is different between the two institutions—the Court is now just an arm of the hardest-right parts of the conservative movement, while the Fed is enthralled to a less ideologically rigid, but still harmful, pro–ruling class project. In effect, the Roberts Court and the Powell Fed represent the two major wings of the Republican Party: reactionary bigotry on one hand, business libertarianism on the other.

However, the outcomes are similar: Both the Fed’s and the Supreme Court’s unelected leaders are sabotaging most Americans’ personal liberties to suit the preferences of their favored few. The Fed’s interest rate hikes are explicitly intended to destroy the bargaining power of full employment, especially for workers of color. The Supreme Court is systematically stripping away Americans’ rights and the federal government’s protections.

Both institutions’ leaders have behaved unethically in power. In 2021, the Fed faced a slew of alleged insider trading scandals, after which it gestured toward some (opaque) ethics reforms, which the Consumer Financial Protection Bureau’s inspector general said were insufficient last week. The Court justices, as we now know, have enjoyed opulent luxury from wealthy ideologues and legal institutions with business before them. The Fed’s alleged insider traders resigned, though none have faced a trial or formal investigation, and all are doing just fine for themselves—Vice Chair Richard Clarida is now a regular on CNBC. The Court conservatives face no immediate prospect of being removed, and Republican senators raged on their behalf at the thought of it in a hearing on Tuesday.

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The chance for personal financial gain probably isn’t why the Fed undertook its (generally good) COVID-19 interventions, or why the Court is pursuing its (extremely bad) radical right-wing agenda. But causality is beside the point: These unelected, unaccountable leaders feel entitled to exploit their positions for material gain, while making life worse for everyone else in the process. Whether they’re just greedy cynics, or true believers in the virtue of inflicting pain on their fellow Americans, or (most likely) a bit of both, they evidently have no concept of honest public service.

These institutions need to change profoundly; not just their leadership (though that’s a starting point) but the actual powers they wield. As Dayen writes, the Fed should be stripped of its bank supervision powers since it does not take them seriously. (I support giving these duties over to the Federal Deposit Insurance Corporation.) There’s also talk of stripping away Fed independence altogether. The rot at the Court, though, requires even deeper changes. The Prospect’s Ryan Cooper has argued, I think persuasively, against the power of judicial review. At the very least, as I argued the day ProPublica dropped its first story, Thomas must be investigated, tried, and if found guilty, impeached.

These institutions need to change profoundly; not just their leadership but the actual powers they wield.

Elites who work in and around these institutions often make the same argument against even considering any of these proposals: that it is absolutely essential to preserve both the Fed’s and the Court’s “legitimacy,” in an abstract sense, and any talk of reform imperils that legitimacy. Even in the face of material sloppiness, rank corruption, and direct public objection to their actions, questioning the Fed or the Court could (gasp!) weaken people’s willingness to accept the outcomes they dictate. To the institutionalists, that must be avoided at all costs.

It’s infuriating how powerful this argument has proven to the Biden administration and the mainstream media, since it’s such an obvious sham. For one, it is willfully ignorant of how power works in government. The Court and the Fed aren’t Tinkerbell. They don’t disappear if people stop believing in them. Their dictates are backed by the power of courts to enjoin, to confiscate property, and lock people up, as well as the most militarized police force in the Western world.

But more importantly, that “legitimacy” argument is exactly backwards. If it is so essential to maintain faith in the Fed and the Court, then both institutions must earn that faith from the people. Trust follows from an institution’s actions, not from silencing anyone who points out that the actions prove they are untrustworthy.

The Court is inventing absurd reasons to do the bidding of the conservative ideological movement, whose financial backers then reward the justices with wealth and vacations. This is not how a legitimate court works. It’s predetermining the outcomes it wants and then inventing fictions to justify them, not giving a good-faith, fact-based hearing to the issues.

The Fed is not as bad, but is on a dangerous path. It is ignoring both its full-employment mandate and its financial stability obligations, which are written into the law, by hiking rates while shrugging at bank supervision. Though it is meant to act in the interest of the nation as a whole, like the Court, the Fed’s history shows it has mostly worked at the behest of wealthy capital-owners, even when doing so was morally and materially wrong.

We are living through a true crisis of legitimacy for the Supreme Court. It is long overdue. Ideally, leaders at the Fed will see what is happening and ask some tough, introspective questions about their own powerful, cloistered institution. But the problems at both of these institutions are ultimately symptoms of a deeper, systemic issue: the lack of democracy across our governing bodies, from the Senate’s filibuster and disproportionality, to state elected officials being literally stripped of their ability to do the people’s work.

Biden claims frequently that he sees his presidency as a battle to restore the soul of our nation, and his foreign policy as an effort to prove that democracy is superior to authoritarianism. He endorsed reforming the filibuster and welcomed the “Tennessee Three” to the White House, for which he deserves praise. (No word on Montana Rep. Zooey Zephyr yet, though, at the same time that his administration senselessly triangulated on trans rights.)

But does he think unquestioned deference to a Court making nonsense, anti-democratic rulings—whose majority was appointed by presidents who lost the popular vote—advances either of these goals? What about letting the Fed sabotage his middle-out economic agenda with an induced recession just before re-election, without so much as a tongue-lashing?

The question is whether Biden thinks “democracy” means the set of institutions America has built over the centuries, or if it means the goal of a self-ruling public those institutions were intended to achieve. When an institution is abusing its powers to thwart that goal—when, moreover, its power directly incentivizes its leaders to do so—the institution must be reformed or abolished. Americans have done so plenty of times before. But we can only do so when we name our problems, clearly and courageously, no matter what the profiteers from those problems think.

The Declaration of Independence holds that governments derive their “just powers from the consent of the governed.” A government with no possibility of consent, whether it be an actual monarchy or a de facto judicial dictatorship, is a tyranny. It is time we remember that.