Friday, February 20, 2009

Being the Federal Reserve

According to Wikipedia, the Federal Reserve has the responsibility of "ensuring the the stability of the financial system." Its current responsibilities include:

To address the problem of banking panics
To serve as the central bank for the United States
To strike a balance between private interests of banks and the centralized responsibility of government
To supervise and regulate banking institutions
To protect the credit rights of consumers
To manage the nation's money supply through monetary policy to achieve the sometimes conflicting goals of maximum employment stable prices, including prevention of either inflation or deflation moderate long-term interest rates
To maintain the stability of the financial system and contain systemic risk in financial markets
To provide financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system
To facilitate the exchange of payments among regions
To respond to local liquidity needs
To strengthen U.S. standing in the world economy
Considering that we have had major financial crises, including the Saving and Loans Crises of the 1980s and 1990s with the then revered Alan Greenspan as the chairman for nearly 30 years from 1987 to 2006 under 4 presidents, can the Federal Reserve accomplish these goals?

Should the Federal Reserve be disbanded? If so, for what if anything?


Cynthia said...

These goals to see extraordinally
ambitious. However, the Federal
Reserve should not be disbanded.

It seems there are is an opportunity here to create two
organizations instead of just one.
Split the responsibilities, for a
more do-able program.

judith ellis said...

Cynthia – Yes, something needs to happen for sure. The goals I am less concerned with, as we should always aim high. What concerns me more is the implementation of the goals and the responsibility and accountability on any of them. As with any organization, I am not too sure if it’s always a matter of how many goals there are but of how such goals are initiation and follow through.

Your solution of two organizations may not correct the problems if the entity itself is mismanaged, misguided and misappropriated. I am sure that Greenspan, for example, did a lot of good, but the fact that we are now here in this financial global crisis makes one wonder how effective he really was for all of those years and if, in fact, there should new blood in leadership after a while.

I remember watching Greenspan many years ago and thinking “he’s like a god." He had such power and was so revered. People seemed to worship him. Perhaps such a position should never be to that extent. The same holds true for bankers who have been so exalted because we believed that they held our lives in their very hands.

This is the arrogance that we see so clearly in these Wall Street banks, as if they are not depended on the shuffling of our paper, our money for their very existence. Whenever or wherever in any organization or government there is this sense, abuses are more than likely to abound.