How the Federal Reserve Became Too Big to Fail
A conversation with Jeanna Smialek, author of Limitless, on how a succession of crises expanded the central bank’s powers in ways the public has yet to understand.
The house that Eccles built.
Photographer: Kevin Dietsch/Getty Images North America
This interview has been edited and condensed for clarity.
Allison Schrager: Your new book, Limitless: The Federal Reserve Takes on a New Age of Crisis, is a modern history of the Fed that focuses on the extraordinary expansion of the central bank’s role over the last few decades and the impact it’s had on the US economy. I want to jump in with the quote that closes your book, from the former Fed chair Marriner Eccles: “The Fed’s actions are seldom popular. If it is to succeed in its mission, it will need great internal strength in its composition, great courage in its action, and a sustained…understanding of the role it should play in our society and democratic capitalism.” Do you think the Fed still does things that are unpopular?
Jeanna Smialek, author, Limitless: The Federal Reserve Takes on a New Age of Crisis : Eccles was instrumental in cementing the Fed as a power center and shaping the Fed’s role in the world. He saw the Fed’s job primarily as stoking the economy when things were bad, and keeping it cool when things were good. He felt the Fed needed to be independent of the elected government and capable of doing the hard work of slowing down the economy in order to keep inflation under wraps. What he’s saying here is that he anticipates the Fed’s having a future rife with instances where it does things that nobody likes.