I have a question about the Federal Reserve system at the heart of our monetary system. I have heard many accounts and explanations. I am very wary of anything I read in the news, and even more wary of what our government does. Was the act actually concocted on a private island by powerful, wealthy bankers? Was president Wilson actually remorseful of the passage of the act and its effect? Was the act passed under less than the usual standard of congressional consensus and due process? Can you comment on debt as a dynamic within the Fed? Should the public be wary of the lack of transparency? I have absolutely no faith in our system's ability to promote anyone else's interest, except the wealthy and big business. Any cause for optimism otherwise? Can you suggest a good book on the Fed? Thanks.
The Federal Reserve has a long history as the nation’s central bank. While there have undoubtedly been many changes in the U.S. economy, banking, and the financial sector since the passage of the Federal Reserve Act in 1913, much of the structure of the Federal Reserve System has remained intact. Those interested in historical context surrounding the creation of the Federal Reserve, and the Federal Reserve Act itself, might consider reading a book called “The Balance of Power: The Political Fight for an Independent Central Bank” published by the Federal Reserve Bank of Kansas City in 2012.
More recently, the U.S. economy went through a sharp recession and financial crisis in 2008 – 2009 and the Fed responded by providing monetary policy accommodation in an effort to stimulate growth. Some of this accommodation (often referred to as quantitative easing) involved the purchase of long-term securities, such as long-term U.S. treasury securities and mortgage backed securities, in an effort to further boost a sluggish economy by reducing longer-term interest rates. These monetary policy measures resulted in an expansion of the Fed’s balance sheet from less than $1 trillion before the crisis, to approximately $4.5 trillion at the end of 2015. The nature of the financial crisis, and of the Fed’s substantial monetary policy response, has raised interest in the functioning of the U.S. economy and the Fed as many were affected by the severe economic recession. Today, there are numerous resources one may access to learn more about these important topics. To name just a few, these resources include public speeches by Fed officials, Federal Reserve statements and economic projections, and many publications released by regional Federal Reserve Banks or the Board of Governors. Anyone interested in learning more could start by browsing the website of the regional reserve bank located in your area. (For Iowans, this would be the Federal Reserve Bank of Chicago.)