Messing with the Fed?

(Note: This will be my last blog post for about 10 days or so. Even curmudgeons get to go on a summer vacation.)
An interesting petition, signed by at least 175 prominent economists, is in the news today. It urges Congress and the president to keep the Federal Reserve independent and free from political influence. (Read the petition here.)
My first reaction is to wonder what, specifically, it is to which the economists refer. I think it is a general plea to keep politicians from meddling too much in decisions that ought to be made with markets in mind.
The petition says Fed independence is “essential for controlling inflation.” Some day, perhaps soon, the Fed will have to curb the money supply to keep that threat in check. “…it must be allowed to do so without interference.”
It also rejects any calls “to alter the structure or personnel selection” of the Fed, and says the public is protected by “frequent communication” and “testimony before Congress.”
It’s important to remember that the Fed itself was created as a result of a financial panic — one that occurred in 1907. Bankers, such as National City Bank’s Frank Vanderlip, were convinced we needed it because the system of private banks in effect at the time, was “the worst system of banking that there is anywhere in existence.” (That quote comes from “The panic of 1907″ by Robert F. Bruner and Sean D. Carr.)
Beware of grand plans that are born of panics.
The Fed certainly hasn’t kept us from the boom and bust cycles that were a part of life up until then. The nation is much more prosperous, however, than it was 100 years ago.
If you’re going to have a central bank, however, I suppose I agree it should be as free from political influence as possible. The market itself ought to keep the Fed accountable. Your thoughts?