Odd Lots How the Federal Reserve Grew More Powerful Than Anyone Ever Imagined
Mar 13, 2023
Jeanna Smialek, a Fed reporter for the New York Times and author of "Limitless: The Federal Reserve Takes on a New Age of Crisis," discusses the evolution of the Federal Reserve's powers. She highlights how the Fed has expanded its role beyond just setting interest rates, becoming a key player in stabilizing the economy through crises. Smialek dives into its emergency lending capabilities and the challenges it faces amid political scrutiny, all while maintaining its independence in a polarized environment.
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Fed's Evolving Role
- The Federal Reserve has evolved significantly from its original purpose in 1913.
- Initially designed to prevent bank runs, it now manages inflation and stabilizes markets.
Fed Independence
- The concept of Fed independence emerged from its struggle to control monetary policy.
- The 1951 Fed-Treasury Accord granted the Fed greater autonomy, separating it from partisan politics.
Benefits of Independence
- Central bank independence is desirable to avoid short-term political influence on monetary policy.
- The 1970s inflation crisis exemplifies how political pressure can hinder effective inflation control.
