{"id":129930,"date":"2009-12-30T10:40:07","date_gmt":"2009-12-30T15:40:07","guid":{"rendered":"tag:business.theatlantic.com,2009:\/\/3.32767"},"modified":"2009-12-30T12:43:07","modified_gmt":"2009-12-30T17:43:07","slug":"giving-the-fed-more-power-could-make-it-weaker","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/129930","title":{"rendered":"Giving the Fed More Power Could Make it Weaker"},"content":{"rendered":"

One of the hallmarks of the financial regulation reform bills snaking their way through Congress is the empowerment of the Federal Reserve as an overseer of the country’s largest, most important banks. But could giving the Federal Reserve more power actually make it less<\/i> powerful? This<\/a> is some interesting conjecture from Harvard economist Jeremy Stein, in an interview with Real Time Economics:<\/p>\n

I think it’s quite likely we’ll have a somewhat different model of
\ncentral banks a decade from now. I could imagine it would involve
\nbroader powers but somewhat less independence. If you think that the
\nFederal Reserve has to be involved in cyclical leverage policy, then it
\nalso has to be more deeply involved in supervising the banks. With all
\nthose powers, it may be politically harder to sustain complete
\nindependence from the government.\n<\/p><\/blockquote>\n

Interesting thinking. And there’s logic in it, too. After the Federal
\nReserve swung open its doors and bailed out the housing and financial
\nmarkets with trillions of easy dollars, Congress came to audit Bernanke<\/a>,
\nnot to praise him. It’s politically repugnant for an independent entity
\nlike the Federal Reserve to be seen wielding too much power (For an
\nanalog, look at the pressure on nominations for the similarly
\nindependent Supreme Court to be deferential to precedent, not-activist,
\netc).<\/p>\n

It will be interesting to see if financial regulation hold-outs make
\nsomething of this when those bills move to the head of the
\ncongressional queue. You could imagine a last minute deal about Fed
\npowers involving a quid pro quo between a stronger Fed and a more
\npolitically accountable Fed. <\/p>\n

Two final points. It should be said that the Federal Reserve — like
\nthe Supreme Court — only draws scrutiny when it draws attention. For
\nmost of the decade, the attention paid to the Fed was a matter of
\ninterest rates moving a quarter percent up and and down. With new
\nexpanded powers, the Fed should be out of the spotlight for the
\noverwhelming majority of the next decade so long as the banks stay
\nsolvent — ie, the Fed does its job.<\/p>\n

Finally, I think that a more politically tethered Fed would be a huge
\nmistake. It’s not simply that I find Congress’ current incarnation to
\nbe a vestigial shell of a political body. Congress isn’t terribly good
\nat its own job, which is making law. It’s certainly not going to be
\nvery good at the Fed’s job, which is making monetary policy. The
\npernicious implications of our electeds using their political positions
\nto jockey for midterm numbers is bad enough on the whole of our
\neconomy. For heaven’s sake, Congress, keep your fingers off the money
\nsupply levers.


\n

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One of the hallmarks of the financial regulation reform bills snaking their way through Congress is the empowerment of the Federal Reserve as an overseer of the country’s largest, most important banks. But could giving the Federal Reserve more power actually make it less powerful? This is some interesting conjecture from Harvard economist Jeremy Stein, […]<\/p>\n","protected":false},"author":1534,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-129930","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/129930","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1534"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=129930"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/129930\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=129930"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=129930"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=129930"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}