Has the Federal Reserve Overstepped its Mandate?
Talk of the economy has dominated politics since the housing market collapsed in 2008 and sent the country into a serious recession. Trying to diagnose the problem of exactly where the recovery of the American economic system has gone wrong, some have placed the blame on the Federal Reserve, the central banking system of the United States. The Fed was founded in 1913 after a series of economic panics threatened the stability of the country, and since then its responsibilities have grown. Today, the Federal Reserve identifies its duties as: (1) conducting the nation’s monetary policy in pursuit of maximum employment, stable prices, and moderate long-term interest rates, (2) supervising and regulating banking institutions, (3) maintaining the stability of the financial system by containing systemic risk in markets, and (4) providing financial services to depository institutions, the U.S. government, and foreign official institutions.
As the financial crisis unfolded in 2008, the Fed took dramatic, unprecedented action by backing insolvent banks and increasing cash flow to others, holding short-term interest rates near zero, and stockpiling government debt. On September 21, the Federal Reserve announced plans to purchase $400 billion in long-term treasury securities in an attempt to spur growth. Since 2008, politicians and citizens have spoken out against the Fed and its chairman, Ben Bernanke, alleging that the Fed has been encroaching on the world financial system. Some, like Rep. Ron Paul, a Debate Club contributor, have called for increased transparency on the Fed’s inner workings.
Has the Federal Reserve overstepped its mandate? Here is Debate Club’s take:
The Arguments
Yes — Secrecy, bailouts, and inflation have left working Americans holding the (empty) bag
RON PAUL, U.S. Representative and Republican Presidential Candidate Comment (7)
Yes — Congress holds the Fed to vague mandate standards
GARETT JONES, Professor at George Mason University Comment (2)
Yes — The Fed should go back to being steady and independent
SANDY KENNEDY, President of the Retail Industry Leaders Association Comment (2)
Yes — Fed needs to end its excursions into fiscal policy
MARK CALABRIA, Director of financial regulation studies at the Cato Institute Comment
No — Fed should be doing more to reduce joblessness
JOSH BIVENS, Author of 'Everybody Wins Except for Most of Us: What Economics Teaches About Globalization' Comment (1)
No — Question monetary policy if you like, but Fed's actions have been consistent with its mandate
EDWIN TRUMAN, Former Director the Division of International Finance of the Board of Governors of the Federal Reserve Comment
