Reason Foundation

Reason Foundation

What to Do With the Fed

Anthony Randazzo
June 22, 2009, 10:53am

A lot of questions are being asked about the Federal Reserve—when talk of health care third ways and the new green revolution aren't at the plate. The White House proposal last week for shaking up the regulatory structure calls for a lot of new powers being transferred to the Fed, including increased bank oversight powers and as the teeth for a systemic risk council. This sparked immediate concern from members of Congress, and a lot of ire from those who think the Fed caused the problems by mismanaging monetary policy. In the midst of the debate, here are some questions to think about:

In related news, the FMOC has some important decisions to make this week on long-term interest rates:

"The Fed is boxed in. The slack in the economy that is likely to persist for a very long time suggests the need for stimulative monetary policy to lower long-term interest rates through the purchase of Treasurys. The fiscal situation argues against this policy action, because it would weaken the Fed's inflation-fighting credibility. How can the Fed get out of the box and pursue the expansionary monetary policy that is needed right now? The answer is that the Obama administration and Congress have to get serious about long-run fiscal sustainability."

Read the rest of Columbia professor Frederic Mishkin's WSJ commentary for more thoughts on the interest rate situation.

Anthony Randazzo is Director of Economic Research

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