Press Releases

Subcommittee Reflects on a Century of Central Banking

Washington, September 11, 2013 -

As the Federal Reserve marks the 100th anniversary of its creation this year, the Financial Services Subcommittee on Monetary Policy and Trade today kicked off a series of oversight hearings to examine the central bank’s conduct of monetary policy.

“2013 will mark the 100th anniversary of the Federal Reserve System. Such an anniversary does not necessitate legislative reform of the institution, but it does provide an opportunity to reflect on the Fed’s statutory mission, responsibilities, and capabilities,” said Subcommittee Chairman John Campbell (R-CA). 

“What was the Federal Reserve’s original mission and how did it implement its original tools?  How has the Federal Reserve responded to economic booms and busts?  What did the Federal Reserve do leading up to, during and in the wake of the 2008 financial crisis that is consistent with or is a departure from historical norms?  What should the Federal Reserve do in its next one-hundred years?  It’s questions like these that our committee will be focused on during this oversight effort,” Campbell added. 

At today’s hearing, subcommittee members focused primarily on the Federal Reserve’s monetary policy over the last 100 years and how the Fed has been most effective when following clear, well-understood rules.  When monetary policy was more rules-based and less improvisational, as it was during most of the 1980s and 1990s, the performance of the economy improved.  When the Fed has not followed a rules-based approach – like during the 1970s and today - – economic growth has been slower and more volatile. 

Members also discussed the Federal Reserve’s emergency lending authority, which was used to bail out banks and non-banks, including Bear Stearns and AIG, during the financial crisis. While proponents of the Dodd-Frank Act claim that act limits the Fed’s emergency bailout authority, witnesses said those limitations will not prevent the Fed from carrying out the same kinds of bailouts as it did during the financial crisis.  More than three years after the passage of Dodd-Frank, the Federal Reserve has failed to adopt procedures mandated by the law implementing restrictions on its emergency authority.


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