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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.

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.


9:45 AM

10:00 AM
MARTIN BAILY, Brookings Institution
BRENDAN BROWN, Mitsubishi Securities International
JAMES GRANT, Grants Publishing
ALLAN MELTZER, Hoover Institution


11:30 AM


Speaker Biographies

Martin Baily is a senior fellow in economic studies at the Brookings Institution. He is also a senior adviser to McKinsey & Company, an economic adviser to the Congressional Budget Office and a director of The Phoenix Companies. He currently is the co-chair of the Financial Reform Task Force supported by the Pew Charitable Trusts and a member of the Squam Lake Group of academics working on financial reform issues. Previously, Mr. Baily was chairman of the Council of Economic Advisers, and he was one of the three members of the President’s Council of Economic Advisers from October 1994 until August 1996. From 2001 to 2007, he was a senior fellow at the Peterson Institute, where he published books on the European economy and pension reform.

Brendan Brown is the executive director/head of research at Mitsubishi UFJ Securities International PLC in London, where he advises institutional investment clients in Japan, Europe and the United States. His main research interests include monetary economics, international financial history, the European monetary union, the Japanese economy and capital market pricing. He is the author of many books on international financial and monetary topics, including most recently “The Global Curse of the Federal Reserve” (Palgrave, 2011) and “Monetary Chaos in Europe 1914–31” (Routledge, 2nd edition, 2011). 

James Grant is the founder and editor of Grant’s Interest Rate Observer, a journal that focuses on the investment markets. He began his career in journalism in 1972 at the Baltimore Sun. He joined the staff of Barron’s in 1975 where he originated the “Current Yield” column. He is the author of the newly published book  “Mr. Speaker! The Life and Times of Thomas B. Reed, the Man Who Broke the Filibuster” (Simon & Schuster, 2011) and has also authored several other books on finance and financial history. Mr. Grant has appeared on “60 Minutes,” “The Charlie Rose Show” and “CBS Evening News” as well as a 10-year stint on “Wall Street Week.” His journalism has appeared in a variety of periodicals, including the Financial Times, The Wall Street Journal and Foreign Affairs.

John H. Makin is a former consultant to the U.S. Treasury Department, the Congressional Budget Office, and the International Monetary Fund. He specializes in international finance and financial markets (stock, bonds and currencies including the euro and the U.S. dollar). He also researches the U.S. economy (including monetary policy and tax and budget issues), the Japanese economy and European economies. He is a principal at Caxton Associates and the author of numerous books and articles on financial, monetary and fiscal policy. Mr. Makin writes AEI’s monthly Economic Outlook.

Allan Meltzer is the Allan H. Meltzer University Professor of Political Economy at Carnegie Mellon University. He is the author of “History of the Federal Reserve, Volume I: 1913–1951” (University of Chicago Press, 2002), a definitive research work on the Federal Reserve System. He has been a member of the President’s Economic Policy Advisory Board, an acting member of the President’s Council of Economic Advisers and a consultant to the U.S. Treasury Department and the Board of Governors of the Federal Reserve System. In 1999 and 2000, he served as the chairman of the International Financial Institution Advisory Commission, which Congress appointed to review the role of the International Monetary Fund, the World Bank and other institutions. The author of several books and numerous papers on economic theory and policy, Mr. Meltzer is also a founder of the Shadow Open Market Committee.

Alex J. Pollock is a resident fellow at AEI focusing on financial policy issues, including housing finance, government-sponsored enterprises, retirement finance, corporate governance, accounting standards and the banking system. Previously, he spent 35 years in banking, including 12 years as president and CEO of the Federal Home Loan Bank of Chicago. He is the author of numerous articles on financial systems and the organizer of the “Deflating Bubble” series of AEI conferences. In 2007, he developed a one-page mortgage form to help borrowers understand their mortgage obligations. He is a director of the Chicago Mercantile Exchange, the Great Lakes Higher Education Corporation and the International Union for Housing Finance, and the chairman of the board of the Great Books Foundation.

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