Prof. Johnson says he is a follower of George Stigler, who made the point that when you regulate industry, industry will attempt to capture the regulators. Bankers are able to capture the regulation and get themselves huge commissions to take on risk. We witnessed one of the most sophisticated episodes of regulatory capture in the history of humankind.
When the Fed's defenders champion its independence, what they mean is independence from democratic institutions. It turns out not to be so independent of the large banks.
In most of the world, government and banking tend to be highly entangled. I read Niall Ferguson as saying that this entanglement historically came about because governments were financing wars. One of the dubious achievements of the Progressive movement was convincing Americans that such entanglement is necessary in a modern economy that did not need to finance wars.