Understanding the Interventionist Impulse of the Modern Central Bank

Jeffrey Lacker

Speech from Federal Reserve Bank of Richmond

Abstract: The financial crisis of 2007 and 2008 was a watershed event for the Federal Reserve and other central banks. The extraordinary actions they took have been described, alternatively, as a natural extension of monetary policy to extreme circumstances, or as a problematic exercise in credit allocation. I have expressed my view elsewhere that much of the Fed's response to the crisis falls in the latter category rather than the former.1 Rather than reargue that case, I want to take this opportunity to reflect on some of the institutional reasons behind the prevailing propensity of many modern central banks to intervene in credit markets. As always, these remarks are my own and the views expressed are not necessarily shared by my colleagues on the Federal Open Market Committee.2

Date: 2011-11-16
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Journal Article: Understanding the Interventionist Impulse of the Modern Central Bank (2012)
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