By Simon Johnson
The Federal Reserve has great power in modern American society, including the ability to move the economy and, at least indirectly, to create or destroy fortunes. Its powers operate in two ways: through control over monetary policy, meaning interest rates and credit conditions more broadly, and through its influence over how the financial system is regulated generally and how specific large banks are treated.
The secrecy of our central bank has long been a source of controversy. In line with changes at central banks in other countries over recent decades, the Fed’s chairman, Ben Bernanke, has pushed for more transparency regarding how individual members of the Federal Open Market Committee view the economy – and thus how they are thinking about the future course of interest rates (and the Fed keeps us posted). This is a commendable change, helping people throughout the economy understand what the Fed is trying to do and why.
Under pressure from both left and right – for example, in the unlikely alliance of Senator Bernie Sanders of Vermont and Representative Ron Paul of Texas – the Fed has also, after the fact, disclosed more of its actions during the recent financial crisis.
But in terms of its process for determining financial-sector regulation, the Federal Reserve – at least at the level of the Board of Governors in Washington – is moving in the wrong direction. Continue reading “Why Won’t The Federal Reserve Board Talk To Financial Reform Advocates?”