Money, supervision, and financial stability: a money-credit constitution entrusted to independent but constrained central banks

Paul Tucker

Chapter 13 in Central Banks and Supervisory Architecture in Europe, 2022, pp 156-169 from Edward Elgar Publishing

Abstract: "I insist that neither monetary policy nor the financial system will be well served if a central bank loses interest in, or influence over, the financial system." (Paul Volcker, 1990). Paul Volcker's words delivered just a few years after retiring from the Federal Reserve, combined wisdom with prophecy. In the years leading up to the 2007-09 Great Financial Crisis, there were two dominant international financial centres. In one, the Federal Reserve had lost interest in the financial system. In the other, the Bank of England had been stripped of its regulatory powers. Chaos ensued. This chapter is about why Volcker was right, and what that means for central banks in constitutional democracies.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2022
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