ABSTRACT
Since the establishment of the Federal Reserve System in 1913, the Fed’s relationship with both Congress and the President has gone through many phases, and proposals to change this relationship, or the way the Fed conducts monetary policy, have appeared frequently in Congress. During the decade before the 1951 Accord, Federal Reserve actions were dominated by considerations arising from the government’s World War II financing needs. During January and February 1951, the Treasury attempted to bind the Fed to the maintenance of low interest rates through public announcements. While the President established a formal committee to resolve the issues of conflict, the actual “accord” between the two institutions was worked out directly between Federal Reserve and Treasury officials. Interest rates gradually rose during the two years following the Accord, and market interest rates became much more volatile as the Fed was now able to pursue more activist policies.
