In theory, the Fed is supposed to stay out of policy matters that aren't directly tied to its own mandates, and politicians are supposed to refrain from trying to tell the Fed what to do. In practice, the lines can get blurry.
Some Fed watchers say Chairman Alan Greenspan strayed too far into fiscal policy on several occasions, starting under Presidents George H. W. Bush and Bill Clinton. The man known as "the maestro" made perhaps his biggest foray into the politics of taxes and budgets soon after George W. Bush won the Florida recount battle and the presidency.
"As soon as Bush was elected [Mr. Greenspan] flip-flopped" and supported the Bush tax-cut proposal, says Kenneth Thomas, a historian of the Fed who lectures at the University of Pennsylvania's Wharton School. The new president "would never have gotten it through Congress without the maestro," Mr. Thomas says.
In late January 2001 Greenspan, while not necessarily endorsing the details of Bush's proposal, told a Senate committee that forecasts of large budget surpluses had tilted him toward embracing tax cuts.