I am Superman: The Federal Reserve Board and the Neverending Crisis
Richard Christopher Whalen
Kroll Bond Rating Agency; Economic Advisory Committee of FINRA; Villanova -- Finance Department Advisory Committee; National Association of Business Economists
August 1, 2010
Networks Financial Institute Policy Brief 2010-PB-03
This article asserts that, in dealing with the 2007-2009 financial crisis, the Federal Reserve Bank (Fed) has placed its role as monetary agency and de facto steward of the market for U.S. Treasury debt ahead of its statutory responsibility for ensuring the soundness of the private banks. This is not to say that the Fed supplies whatever credit the government wants - at least not yet - but in terms of both the provision of credit to the private financial system and the price of this credit, the growing fiscal imbalances of the U.S. government seem to be playing an increasing role in Fed policy decisions. This paper explores some of the issues involved in recent Fed policy decisions and draws some preliminary conclusions as to the conflicts between the Fed’s role as central bank and also as prudential supervisor.
Number of Pages in PDF File: 40
Keywords: Federal Reserve, Monetary Policy, Bank Supervision, Systemic Risk, Federal Deposit Insurance, Credit Default Swaps, Over the Counter, Derivatives
Date posted: August 25, 2010 ; Last revised: September 27, 2010
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