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Narayana Kocherlakota

How to Make the Fed Work Better

Accountability and transparency don't require radical reform.
The power is there.

The power is there.

Photographer: Andrew Harrer/Bloomberg

The U.S. Federal Reserve is an unusual institution: It makes key policy decisions on behalf of the public, yet its constituent parts -- the 12 regional Feds -- are legally part of the private sector. In a new series of proposals, Professor Andrew Levin of Dartmouth University argues that making the regional Feds into truly public institutions is crucial to improving the Fed’s accountability, transparency and governance.

I’ve known Levin for a long time, and I have a great deal of respect for his integrity and acumen. That said, I think his aims can be achieved without such a radical reform. All it requires is some changes at Fed’s Board of Governors in Washington, D.C. -- a fully governmental entity that already oversees and has a great deal of control over the regional Feds.