Four Ways to Reform the Fed

The expanding responsibilities of the U.S. Federal Reserve have prompted numerous calls for reform, ranging from intrusive audits to outright abolishment. I disagree with most of the proposals, but I do believe that the central bank would benefit from some changes -- four, to be exact.

First, a bit of context. In a recent essay that will appear in the Journal of Economic Literature, I explore four aspects of the Fed's structure: to what extent elected officials set the bank's objectives and hold it accountable; how the Board of Governors in Washington D.C. oversees the twelve regional Federal Reserve banks; what role the presidents of the regional banks play in the making of monetary policy; and how the functions of the various parts of the Fed system have changed over the past few decades. The inspiration came from an excellent new book, "The Power and Independence of the Federal Reserve," in which the legal scholar Peter Conti-Brown describes the historical forces that have shaped the idiosyncratic and multi-faceted institution, with its ostensible independence and responsibilities ranging from helping banks move money to managing the economy and overseeing the financial system.