Monetary Policy

Few institutions in the country today are less loved than the Federal Reserve. At a time when disillusionment with Washington and Wall Street is rife, the Fed — which is quite literally a hybrid of the government and the banking sector — has come under widespread attack. And while there are important differences between the critiques offered by the right and the left, there are common threads, too. Vermont Senator Bernie Sanders, blasting the “veil of secrecy” surrounding the Fed’s emergency lending program at the height of the financial crisis, struck a tone sounded by many Fed critics: the institution is unaccountable, opaque, and unduly responsive to entrenched interests.

To the extent that there’s merit to this complaint, why might it be so? What elements of the Fed’s formal and informal institutional design contribute to this situation?

With the economy stalled and unemployment high, will the Federal Reserve shake off old habits and craft policy built to meet current circumstances?