Post-Event Summary
The U.S. Federal Reserve maintains a significant presence in the financial markets of the United States and world economies, and policy experts gathered Wednesday at the American Enterprise Institute (AEI) to discuss the validity of the Fed’s past actions and its position as villain, hero or both. Allan Meltzer of the Hoover Institution argued that the U.S. central bank currently acts on the self-serving commentary of financial markets and ignores the long-term effects of its actions. The Fed must limit discretion and reexperience the great discipline and accountability of its past. Brendan Brown of Mitsubishi Securities International stressed the peaking villainy of the Fed, as it runs monetary policy with no guiding concept of stability. Operations under the looming recession have manipulated unnatural, long-term interest rates, furthered deflation and sparked currency warfare. Martin Baily of the Brookings Institution countered that although the Fed has made missteps, ample evidence exists of successful long-term efforts. He argued that our economy is inherently unstable and needs a firm guiding hand of monetary policy; the Fed became a hero in the recession when it stepped in and responded aggressively. James Grant of Grants Publishing discussed how the Fed’s current activities differ from the ideals of our founders. The central bank has become a species of central planning, influencing macroeconomic outcomes and depending on the collective responsibility that leaves a gaping hole in the accountability of risk bearing. AEI’s John Makin noted the complexity of the recession and the corresponding reactions. As the crisis continues, the Fed should focus on creating strategic short-run transitions and developing the optimal long-run solution.
---ALLISON STOLTE

Event Description
The Federal Reserve has a remarkable presence as the central bank to not only the United States, but also the world. Is the Fed a hero for saving the US financial system and economy from collapse in 2007–2009 with bold, unprecedented actions? Or is it a villain for not only inflating the great 21st century bubble, but over the decades also depreciating the dollar and distorting markets? Perhaps it is it both hero and villain. Has the Fed lived up to reasonable expectations of what the top central bank can and should do? Or are our expectations of its superior knowledge and insight into future trends and risks naïve and unreasonable? What should the Fed do or not do now? Our expert panel debates these and other issues.