New Delhi, Dec. 30 -- The greatest threat to the independence of the US Federal Reserve does not come from President Donald Trump's attacks or a Supreme Court ruling that might expand his authority. It is the Fed's longer-term shift from lender of last resort to lender of immediate resort.

Without a clear distinction between temporary liquidity support and protection for insolvent institutions, the Fed's independence turns into cover for ad hoc bailouts and monetary policy becomes a hostage of weak institutions and authorities' reluctance to admit supervisory failure.

With each successive crisis over the past decade and a half, from 2007-08 to the 2020 covid shock and the mid-size bank turmoil of 2023, the Fed has steadily expanded the ...