1) You understate the amount of regulatrory capture by both the politicians and Wall Street by focusing on the tenure of Volcker; as it stands the Fed is a creature of a Wall Street run amok.
2) With the "indispensible" Fed on the beat, whence came 70s, 80s inflation in the first palce?
This is like calling Bernanke the "savior" of the economy when he was saying there was no housing bubble all along (let's not even bring up the crimes of Greenspan).
3) Most Democrats, leftists, liberals, Progressives, socialists etc. have no ideological or theoretical problem with government intervention in the economy (ironically, that sounds a lot like your hated Ron Paul) we just want it to be transparent and under democratic control.
4) Nothing could be a more Soviet institution than the Federal Reserve, but you seek to invoke Soviet Central Planning as something to be avoided. Which is it?
5) The issue at hand is transparency; don't misdirect by starting a new argument about the merits of an "independent" Fed.
6) Democratic government is more important thatn economic optimization, if the economy were to be less efficient with a government of, by, and for the people, I'm willing to take the "hit".