During what the reporter later characterized as a rant encompassing many of the Fed's failures in responding to the COVID pandemic, the senior Goldman banker complained that the Fed's political "independence" has been hurt, which in turn has weakened its credibility with markets. For a preview of how this could play out in the long term, just take a look at how successful Turkey's central bank has been at enforcing price stability.

The problem is that, thanks to its newfound political bearings, the Fed is more reluctant to take dramatic but ultimately necessary action for fear of damaging its public image (and also giving lawmakers reason to start another round of Fed bashing).

What's gone on in the past couple of years has brought "into question the independence of the Fed," Waldron said hours before the Fed's meeting Wednesday. He questioned the Fed's strength to act as an "independent, monetary policy engine that is doing what it thinks is right and not what's expedient."

"They have a chance here to do that, but I am a little worried about whether they'll stand up and do it," Waldron said at a virtual meeting of the New Jersey State Investment Council, where he was a speaker.