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A Fed for Next Time: Ideas for a Crisis‐​Ready Central Bank

Summary:
How Will the Fed Fight the Next Crisis? In just a dozen years, the Federal Reserve has faced two severe crises. And twice it has responded by leaning heavily on emergency lending powers it seldom used before by improvising temporary lending programs and taking part in fiscal policy. In the meantime, the Fed’s nonemergency lending facilities have hardly changed, and may well prove insufficient when the Fed faces its next crisis. The implication of this is both obvious and ominous: while we still count on the Fed to deal with crises, we no longer know how it will deal with them. Instead of being predictable, the Fed’s crisis‐​prevention methods have become unpredictable–and controversial–adding to, instead of allaying, economic scrutiny. Can we do better? Can we improve the Fed’s systematic

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How Will the Fed Fight the Next Crisis?

In just a dozen years, the Federal Reserve has faced two severe crises. And twice it has responded by leaning heavily on emergency lending powers it seldom used before by improvising temporary lending programs and taking part in fiscal policy.

In the meantime, the Fed’s nonemergency lending facilities have hardly changed, and may well prove insufficient when the Fed faces its next crisis.

The implication of this is both obvious and ominous: while we still count on the Fed to deal with crises, we no longer know how it will deal with them. Instead of being predictable, the Fed’s crisis‐​prevention methods have become unpredictable–and controversial–adding to, instead of allaying, economic scrutiny.

Can we do better? Can we improve the Fed’s systematic response to crises, making that response both more effective and more predictable? Can we thereby limit the Fed’s entanglement in politics? What can the Fed do to promote these ends? What might Congress do?

PANEL 1: REFORMING CREDIT POLICY

  • Sir Paul Tucker, chair of the Systemic Risk Council and former Deputy Governor of the Bank of England
  • Kathryn Judge, Harvey J. Goldschmid Professor of Law, Columbia Law School
  • Lev Menand, Academic Fellow and Lecturer in Law, Columbia Law School

Moderator: Jeanna Smialek, Federal Reserve and Economics Reporter, The New York Times

Register for upcoming panels here.

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