Check out the following commentary by Economics Finance blog contributor Alex Knapp.
My Conversation with Lynn Browne
The Executive Vice President and Economic Advisor of the Federal Reserve Bank of Boston
I recently had the privilege of speaking with the Federal Reserve Bank of Boston’s Executive Vice President and Economic Advisor, Lynn Browne, about the current state of the economy, the ever changing role of the Fed, and the political and social reforms in finance and economics.
Below I will cover the topics we discussed and input Ms. Browne’s and my own opinions when necessary.
The Federal Reserve System was formed in its modern sense in 1913 through the Federal Reserve Act. It was formed in order to avert banking panics, which were prominent during that period and the worst of which came in 1907. The idea of a central bank in America wasn’t new in 1913, there had been two previous failed attempts to create a national central bank, the first in 1971 and the second in 1816. Because the crisis of 1907 was the worst of the time, is became the final push that was needed to form the Federal Reserve System.
When I asked Ms. Browne about the growth in the breadth of the Fed’s responsibilities since its origination, she suggested that it, in part, had to do with the occurrence of the Great Depression. During the Great Depression, policy makers realized that monetary policy and financial markets were more interconnected than they had previously thought. As financial crisis’ and economic recessions occurred through the years since the Fed’s creation, it has taken on more responsibilities to combat these ever changing and ever growing financial markets and economy.
Ms. Browne said that one of the Boston Fed’s largest departments when she started 27 years ago was the coin wrapping department. This department is literally what it sounds like, they wrapped coins. Thankfully that department doesn’t exist anymore and they Fed has focused its efforts and resources on bigger and better things.
With this seemingly ever expanding role of the Fed, I asked Ms. Browne what she thought the future held for her and her colleagues. She thought with new financial reforms such as the Dodd-Frank Bill, the Fed “[Would be] given more tools to use to combat systemic risk” and it would be up to the Fed and other regulators how they used these tools to control aggregate risk in financial markets and the overall economy. Ms. Browne saw the future of the Fed not only acting as the lender-of-last-resort, but also as an economic stabilizer.
It seems that as long as financial crisis’ occur, which in our inherently inefficient economy, they inevitably will, the Federal Reserve and other financial regulators will continue expanding their power, to keep up with new threats to our economic stability.