How the Federal Reserve won its independence : Planet Money The story of the day the Federal Reserve got its independence and the fight — an actual physical fight — to keep it. | Subscribe to our weekly newsletter here.

Happy Fed Independence Day (Update)

Happy Fed Independence Day (Update)

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William McChesney Martin, the man who defended the Federal Reserve against an attack by the President. Federal Reserve Board/Federal Reserve [Public domain] hide caption

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Federal Reserve Board/Federal Reserve [Public domain]

William McChesney Martin, the man who defended the Federal Reserve against an attack by the President.

Federal Reserve Board/Federal Reserve [Public domain]

In the years before 1951, the Federal Reserve took orders from the Treasury, and by extension, from the President. The President would request that interest rates remain low, and the Fed would oblige.

But this became a problem. Low interest rates are great for people to borrow money to buy stuff, and for businesses to grow and hire people. But low interest rates also drive up inflation. And a big part of the Federal Reserve's job is to keep inflation low.

So the Fed decided it needed to reclaim its power. And on March 4, 1951 it finally did. The Fed was officially free. Sort of. On today's show, how the Fed won its independence and then fought to defend it.

Music: "Superheroes," "Venice Bar," "Over the Border," and "Retrospective."

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