National monetary policy by regional design: the evolving role of the Federal Reserve banks in Federal Reserve System policy

David Wheelock

No 1998-010, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper examines the history of Federal Reserve Bank input into Federal Reserve System monetary policymaking. From the Fed's founding in 1914 through the Great Depression, the Reserve Banks held the balance of power. Dissatisfaction with the Fed's performance, however, led to a wholesale reorganization in 1935 that greatly enhanced the authority of the Federal Reserve Board, but retained a role for the Federal Banks through the membership of their presidents on the FOMC, as well as in setting the discount rate. I argue that the Fed's decentralized structure was not the principal cause of Fed errors during the Great Depression. In addition, by retaining a role for the Federal Reserve Banks, the Fed's present structure provides the System with a measure of political independence and encourages a competition of ideas within the System that enhances the quality of policymaking.

Keywords: Federal Reserve System - History; Monetary policy - United States; Federal Open Market Committee (search for similar items in EconPapers)
Date: 1999
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Published in Regional aspects of monetary policy in Europe. J. von Hagen and> C. Waller, editors. Kluwer Academic Publishers, 1999

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:1998-010

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DOI: 10.20955/wp.1998.010

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