Inside Report...: More FED Medicine
THE FACT that the Federal Reserve Board is intent on still another interest rate boost is bringing President Johnson face - to - face again with the historic question of whether he or the hanking industry shall determine maior economic policy.</br></br>This will be one of the many uncomfortable issues to be tossed at Secretary of the Treasury Henry H. (Joe) Fowler when he appears before the Senate Finance Committee Friday. One Democratic SenatorÛÓEugene McCarthy of MinnesotaÛÓ plans to frame the issue in the form of a touchy question.</br></br>Does the President need standby economic powers, including statutory authority to over-rule the Federal Reserve Board, which serves as AmericaÛªs central bank and has always been dominated by commercial bankers?</br></br>The Administration is seeking no such power and would prefer not to have the question asked. Yet, the question of the FEDÛªs cherished ÛÏindependenceÛ from the Executive Branch is once again critical as a result of the inflation scare spawned by the Vietnam war.</br></br>THE INTEREST rate boost decreed by the FED three months ago in defiance of Mr. Johnson has failed completely as an anti-inflationary device, just as critics predicted. Instead, it started a chain reaction in interest rate boosts. And though orthodox bankers deny it, this increase in the cost of money has been as inflationary as an increase in the cost of steel.