Liberty Street Economics

« | Main | »

February 10, 2012

Historical Echoes: Return to Jekyll Island (Not The Creature from)

Amy Farber, New York Fed Research Library

On November 5-6, 2010, the Federal Reserve Bank of Atlanta and Rutgers University cosponsored a conference titled “A Return to Jekyll Island: The Origins, History, and Future of the Federal Reserve.” It took place at the Jekyll Island Club Hotel on Jekyll Island, Georgia—the same location as the historic meeting that led to the Federal Reserve Act of 1913. A five-minute film called “Jekyll Island and the Creation of the Federal Reserve” tells the story with riveting still images of the participants and setting.


    The idea of a “reunion conference” came from Rutgers economist Michael D. Bordo, with the purpose of marking the 100th anniversary of this historic meeting. Bordo answers some questions on Rutgers’ website about the original conference and what the Fed has learned since then. The agenda for the conference, with links to papers, presentations, and interviews, is available from the Atlanta Fed.

    Of great interest at the conference was a panel discussion in which E. Gerald Corrigan (former president of the Federal Reserve Bank of New York), Alan Greenspan, and Ben Bernanke talked about their biggest Fed-related crises. The moderator was University of Chicago professor Raghuram Rajan, author of the book Fault Lines. The webcast of the discussion, at about forty-four minutes, is worth watching. The discussion covers such topics as the Fed response to the 1987 stock market crash, the Great Moderation, the liquidity interventions in response to the 2008 Lehman bankruptcy, and the Fed's use of large-scale asset purchases. The transcript is also available.

    Paul Volcker was invited to be on the panel, but was unable to attend. However, he does offer some introductory remarks to the webcast:

It [the Fed in 1913] was quite a different institution; there was a lot of suspicion that it would be politicized or dominated by Wall Street or too-concentrated power. Some of those suspicions were reflected in the fact that the Federal Reserve in those days didn't even have the authority to buy government securities. There wasn't any idea of open market operations. There really wasn't any concept of monetary policy in the interest of stabilizing a growing economy.

Now that's all passed, but the controversy clearly has remained; the challenges have remained. The Federal Reserve has taken heroic action in recent years; it's acted fully up to the limits of its authority, it stabilized the financial system, saved the economy. It's been, to me anyway, an unexpected reward for those efforts. Somehow we come out of that crisis with the Federal Reserve regulatory authorities enhanced.

    Here is some good news for the employment of economists: After Greenspan discusses the crash of 1987, he ends by saying:

Then we ran into 2007 and 2008, and it's a wholly different ball game. I think that is going to create more Ph.D.s and more work for advisers and a lot of paper from dissertations.

    A New York Times article about the conference states:

If there was a consistent theme here, it was that the Fed’s independence was hard-won and fragile. After all, it was only in 1951 that the Fed gained full control over interest rates, having been pressed by the Treasury to keep them low to finance the government’s wartime borrowing.

Disclaimer
The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.

About the Blog

Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.

Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.

The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.

Economic Research Tracker

Image of NYFED Economic Research Tracker Icon Liberty Street Economics is available on the iPhone® and iPad® and can be customized by economic research topic or economist.

Economic Inequality

image of inequality icons for the Economic Inequality: A Research Series

This ongoing Liberty Street Economics series analyzes disparities in economic and policy outcomes by race, gender, age, region, income, and other factors.

Most Read this Year

Comment Guidelines

 

We encourage your comments and queries on our posts and will publish them (below the post) subject to the following guidelines:

Please be brief: Comments are limited to 1,500 characters.

Please be aware: Comments submitted shortly before or during the FOMC blackout may not be published until after the blackout.

Please be relevant: Comments are moderated and will not appear until they have been reviewed to ensure that they are substantive and clearly related to the topic of the post.

Please be respectful: We reserve the right not to post any comment, and will not post comments that are abusive, harassing, obscene, or commercial in nature. No notice will be given regarding whether a submission will or will
not be posted.‎

Comments with links: Please do not include any links in your comment, even if you feel the links will contribute to the discussion. Comments with links will not be posted.

Send Us Feedback

Disclosure Policy

The LSE editors ask authors submitting a post to the blog to confirm that they have no conflicts of interest as defined by the American Economic Association in its Disclosure Policy. If an author has sources of financial support or other interests that could be perceived as influencing the research presented in the post, we disclose that fact in a statement prepared by the author and appended to the author information at the end of the post. If the author has no such interests to disclose, no statement is provided. Note, however, that we do indicate in all cases if a data vendor or other party has a right to review a post.

Archives