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Is the Federal Reserve independent? Should it be independent? According to Peter Conti-Brown of Stanford and Princeton Universities, both answers depend on what one means by the Federal Reserve and how one defines "independent."
In a discussion Thursday at AEI, a panel of distinguished scholars examined the realities of the Fed's governance and role in the American — and international — financial systems and considered what its structure ought to be.
Conti-Brown rejected the dichotomy between the Fed as an independent, technocratic central bank and a mere servant of the Treasury because it has at times been both. Instead, he argued that the Fed is a multidimensional institution that operates within a complex and malleable space.
Bernard Shull of CUNY Hunter College described how the Fed's original limited economic role and system of internal governance — which included representation from every economic interest group in the country — were eroded after the Great Depression and replaced with greater power and autonomy.
In response to whether the Fed is a philosopher king — or an ideal, enlightened ruler — AEI's Alex Pollock answered clearly with "no." To be a philosopher king, Pollock noted, requires superior knowledge and foresight, both of which the Fed lacks.
Moderator Michael Greve of AEI and the George Mason University School of Law concluded that the public's misconception of Fed omniscience and infallibility, encouraged by the Fed itself, needs to be corrected.
The Federal Reserve is one of the most powerful institutions in the world, with an unmatched ability to create systemic risk if its actions prove mistaken. Is the Fed independent, as is often said? If so, should it be independent — an economic philosopher king? Or is it basically a servant of the Department of the Treasury, used to finance government deficits whenever needed? How should the Fed be governed, and to whom is it accountable? What is or should be the role of the Congress?
This event will examine the complicated institutional structure and politics of the Fed and the fundamental changes from its original design, and will consider where governance of the Fed may go from here.
If you are unable to attend, we welcome you to watch the event live on this page. Full video will be poisted within 24 hours.
Michael S. Greve, George Mason University School of Law and AEI
Peter Conti-Brown, Stanford Law School Rock Center for Corporate Governance and Princeton University
Alex J. Pollock, AEI
Bernard Shull, CUNY Hunter College
Michael S. Greve, George Mason University School of Law and AEI
Wine and Cheese Reception
For more information, please contact Emily Rapp at email@example.com, 202.419.5212.
For media inquiries, please contact MediaServices@aei.org, 202.862.5829.
Peter Conti-Brown is an academic fellow (nonresident) at Stanford Law School’s Rock Center for Corporate Governance. Conti-Brown’s research and writing cover banking, administrative law, and public finance, with a particular focus on the political, financial, and legal history of central banking. His articles have appeared in the Stanford, UCLA, and Washington University Law Reviews, among other journals. He is also the editor, with David Skeel, of the book “When States Go Broke: Origins, Context, and Solutions for the American States in Fiscal Crisis” (Cambridge University Press) and author of the book “The Structure of Federal Reserve Independence” (Princeton University Press, forthcoming). He has been quoted in print and online articles published by Reuters, The Economist, and The New York Times and has appeared on C-SPAN. Conti-Brown previously clerked for the Hon. Stephen F. Williams on the United States Court of Appeals for the DC Circuit and the Hon. Gerard E. Lynch on the United States Court of Appeals for the Second Circuit.
Michael S. Greve joined the law school faculty at George Mason University in fall 2012 after having been John G. Searle Scholar at AEI, where he specialized in constitutional law, courts, and business regulation. Before joining AEI, Greve was founder and codirector of the Center for Individual Rights, a public-interest law firm specializing in constitutional litigation. He has served as an adjunct professor at a number of universities, including Cornell University and Johns Hopkins University, and has been a visiting professor at Boston College since 2004. A prolific writer, Greve is the author of nine books and a multitude of articles appearing in scholarly publications, as well as numerous editorials, short articles, and book reviews.
Alex J. Pollock joined AEI in 2004 after 35 years in banking. He was formerly president and CEO of the Federal Home Loan Bank of Chicago from 1991 to 2004. He is also the author of numerous articles on financial systems and the organizer of the Living in the Post-Bubble World series of AEI conferences. In 2007, he developed a one-page mortgage form to help borrowers understand their mortgage obligations. At AEI, he focuses on financial policy issues, including housing finance, government-sponsored enterprises, retirement finance, corporate governance, accounting standards, and the banking system. He is the lead director of CME Group, a director of Great Lakes Higher Education Corporation, a past president of the International Union for Housing Finance, and chairman of the board of the Great Books Foundation.
Bernard Shull is professor emeritus in the Department of Economics at Hunter College of the City University of New York, a special consultant to the National Economic Research Associates, and adjunct professor at Pace University. He has also taught in the Finance and Economics departments at the Wharton School at the University of Pennsylvania, the University of Wisconsin, and the University of Illinois. Shull specializes in the areas of financial institutions, banking regulation and competition, and central banking. He has also held various positions with the Federal Reserve Board, including associate adviser, chief of the Banking Markets Section, and director of research projects for the Federal Reserve's Reappraisal of the Discount Mechanism. He has been a senior economist in the Office of the Comptroller of the Currency and an economist at the Federal Reserve Bank of Philadelphia. He has testified before the Senate and House Banking Committees, has been a visiting scholar at the Office of the Comptroller of the Currency, and has consulted with various government agencies. Shull is the author or coauthor of “The Fourth Branch: The Federal Reserve’s Unlikely Rise to Power and Influence” (2005); “Bank Mergers in a Deregulated Environment” (2001); an earlier book on interest rate volatility; a monograph on the separation of banking and commerce in Financial Markets, Institutions & Instruments; and several working papers and academic journal articles.
The Institutions of Federal Reserve Independence
Peter Conti-Brown | Rock Center for Corporate Governance at Stanford University Working Paper Series | January 2, 2014
Financial Crisis Resolution and Federal Reserve Governance: Economic Thought and Political Realities
Bernard Shull | Levy Economics Institute Working Paper Series | January 16, 2014