According to economist Allan Meltzer of Carnegie Mellon University, who has written about the history of the
Question:
According to economist Allan Meltzer of Carnegie Mellon University, who has written about the history of the Federal Reserve:
Tension between the [Federal Reserve] Board and the reserve banks began before the System opened for business… . [Paul] Warburg described the problem. Dominance by the Board would allow political considerations to dominate decisions about interest rates. Dominance by the reserve banks “would … reduce the Board to a position of impotence.”
Paul Warburg was one of President Wilson’s initial appointments when the Federal Reserve Board began operations in 1914.
a. Why did Congress set up a system that had this tension between the Federal Reserve Banks and the Federal Reserve Board?
b. Has the tension been resolved in the modern Fed? If so, how?
Step by Step Answer:
Money Banking And The Financial System
ISBN: 1801
3rd Edition
Authors: R. Glenn Hubbard, Anthony Patrick O'Brien