Jeff Lacker has taken a deep dive into the past, president and future of the evolution of the Federal Reserve’s credit policy. As a former president of the Federal Reserve bank of Richmond and a long time member of the Shadow Open Market Committee he has taken the opportunity to publish the research he has done as the SOMC commemorates its 50-year anniversary.
Here how’s Jeff sets the stage.
”While the Shadow Open Market Committee may be best known for its 50-year record of prescient critiques of the FOMC’s conduct of monetary policy, it has also devoted significant attention over the years to the Federal Reserve’s credit policy. In fact, the lifespan of the Shadow coincides with a significant growth of the scale and scope of Fed interventions in credit markets.
“That overlap was not a coincidence—the rising financial instability that provoked Fed participation in rescuing failing banks beginning in the early 1970s is attributable in part to the late 1960s rise of inflation that inspired the birth of the SOMC. The Shadow’s critiques of those rescues have been based on a historically-grounded understanding of the role of lender of last resort as a critical element of sound monetary policy, concern about the incentive effects of lending precedents, and the principle that financial institution rescues are tangential to the Fed’s monetary policy responsibilities and constitute fiscal actions more appropriately assigned elsewhere.
”Those principles remain all the more relevant in the twenty-first century as Federal Reserve continues to expand the scope of its credit market interventions.”
So hear and see what Jeff has to say the Fed must do to get its credit policy back on a better and stronger path.
Here is the link to Jeff’s SOMC reaearch paper:
https://www.hoover.org/sites/default/files/2024-10/Jeff_Lacker_Hoover%20paper%20v8d.pdf
Jeffrey Lacker is Senior Affiliated Scholar at the Mercatus Center at George Mason University and a member of the Shadow Open Market Committee and a Fellow of the Global Interdependence Center College of Central Bankers. He worked at the Federal Reserve Bank of Richmond from 1989 to 2017, where he was President from 2004 to 2017. From 2018 to 2022 he was Distinguished Professor in the Department of Economics at the Virginia Commonwealth University School of Business in Richmond, VA. From 1984 to 1989 he taught at the Krannert School of Management at Purdue University. Early in his career I worked at Wharton Econometric Forecasting Associates.
You can find his academic and Federal Reserve publications from before 2017 at this Richmond Fed web page. Speeches and testimony on central bank policy issues (as opposed to the current economic outlook) can be found here under the "At the Fed" tab. Post-2017 work can be found at the tabs for "Recent Appearances" and "Recent Writings". All the speeches he gave as Richmond Fed President are listed at this Richmond Fed web page.
https://www.jeffreylacker.org/
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