The Future of the Fed

Introduction
Andrew Rich, CEO, Roosevelt Institute
Joseph Stiglitz, Columbia University, Roosevelt Institute

 

In opening the event, Nobel Laureate and Roosevelt’s Chief Economist Joseph Stiglitz and CEO Andrew Rich talked about how the financial crisis has irrevocably changed Washington’s approach to monetary policy and called on progressives to actively engage in this dialogue.

“What we’ve learned is that the actions some thought would promote growth actually led to this historic financial crisis, the effects of which will be long-lasting,” said Stiglitz, who just last week was named by Time magazine as one of the 100 most influential people in the world. “Clearly the Fed’s future role needs to extend beyond simply keeping inflation low.”

"Despite recent job growth, uncertainty surrounding our economic future remains pervasive," said Roosevelt Institute CEO Rich in introducing the event. "The Federal Reserve will remain largely responsible for overseeing a dynamic, stable, and sustainable economy, but it is yet to be seen if it is up for the task—and exactly what that task should be."

 

 

The first panel talked about the current challenges surrounding the Federal Reserve—from full employment to financial reform. "One lesson of the financial crisis is how important the Federal Reserve is to the economy and how much liberals and progressives need to engage with it," said Konczal. "Conservatives are organizing against it, and I believe it is time progressives and liberals start to play offense."

Click here to see videos from the first panel divided by speaker

 

 

The second panel looked at the Federal Reserve over the 20th century and how it has adapted to deal with different political and economic realities. It discussed how the Fed has changed in the past and will change in the future to respond to new circumstances. The consensus from the panel was that this is entirely appropriate and it is essential that liberals get involved in shaping it.

“The Fed cannot do its job properly without full employment as one of its key objectives,” said Madrick. “In truth, it has neglected this role now for 30 years.”

Click here to see videos from the second panel divided by speaker

 

 

The final panel looked to potential issues that the Federal Reserve will face down the line—from financial regulation as a macroeconomic issue to capital controls to inflation targeting to the battle for full employment, and the debates surrounding these topics.

“As we move forward it is vital for the Federal Reserve to regain the trust of the American people by clearly revealing how it will use its balance sheet, and the associated fiscal risks that will be incurred by the American taxpayers, in the event of another financial crisis and bailout,” said Johnson. “The new communications strategy on which the Fed is embarking today may be a step in the right direction.”

“The Federal Reserve needs to become more intellectually pluralistic to avoid a repeat of the 'group think' that contributed to its pre-crisis blindness,” said Palley. “Its inflation target should be set to attain the maximum sustainable rate of employment. And the Fed must also apply quantitative balance sheet controls to the financial sector (including shadow banks) to prevent future financial excess.”