Alumni in the news - August 25
Amar Bhide ('77) OpEd in the Wall Street Journal proposing ... "Let’s Break up the Fed", and on CNBC debating Roger Altman about the Ben Bernanke reappointment.
OpEd in the Wall Street Journal - July 28
The Federal Reserve has done a terrible job at financial regulation. Why give it more power? The Obama administration’s plan to increase the powers of the Federal Reserve, says one critic, is like giving a teenager "a bigger, faster car right after he crashed the family station wagon." Treasury Secretary Timothy Geithner disagrees. He argues that the Fed is “best positioned” to oversee key financial companies, and that the Obama plan would give the Fed only "modest additional authority."
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As it happens, the Fed has been led for more than 20 years by chairmen who had no senior management experience. Prior to running the Fed, Alan Greenspan started a small consulting firm and Ben Bernanke was head of Princeton’s economics department. Given their understandable preoccupation with monetary and macroeconomic matters, how much attention could they be expected to devote to mastering and managing the plumbing side of the Fed? While the record of the Fed’s monetary policy has been mixed, its supervision of financial institutions has been a predictable and comprehensive failure.
The Fed’s excessively broad mandate also has thwarted accountability. ... At the very least we should split the monetary policy and regulatory functions of the Fed, as was done through the Maastricht Treaty that established the European Central Bank. What we need now is a debate about how to break up the Fed—and some of the sprawling financial institutions it supervises—in order to make both the regulator and the regulated more manageable and accountable.
Mr. Bhidé, a visiting scholar at Harvard, is the author of “The Venturesome Economy” (Princeton University Press, 2008). He is currently writing a book about the financial crisis.
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