To understand the biggest risk facing the Federal Reserve’s future, consider an otherwise mundane photograph in Jeffrey Lacker’s office overlooking a turbulent stretch of Virginia’s James River.
The president of the Federal Reserve Bank of Richmond stands with his predecessors Robert Black and J. Alfred Broaddus Jr. in front of a relief of Carter Glass, the Virginia lawmaker who co-wrote the Federal Reserve Act of 1913. Together with their research teams, they created a culture over 44 years that held price stability as first among equals of the central bank’s twin goals, which also includes maximum employment.
Richmond’s leadership, and like-minded counterparts at the other 11 regional Fed banks, served as a check against the politically appointed Board of Governors in Washington. They spoke out, and dissented frequently in policy meetings. Black even dissented in favor of tighter money under former Chairman Paul Volcker, who raised rates so high to