Why Fed Power Matters

Chapter 1 introduces the unrivaled political and economic power of America’s Central Bank, the Federal Reserve System. The Federal Reserve Bank is a mutant institution of government. It has enjoyed anonymity from Americans for most of its history even though it wields unparalleled power on domestic policy that is largely free of the traditional system of checks and balances, which routinely grind down presidential and congressional proposals. The exceptionalism of Fed power stands out among the three branches of government within the United States and among democratic capitalist countries. Instead of studying the Federal Reserve as merely a state agency implementing technical monetary and interest rate policy, this book analyzes the Fed as a powerful political institution with its own interests (and market favorites), which its leaders pursue and which contribute to rising economic inequality and racial disparities. The Fed’s exceptional independent capacity and favoritism were spotlighted in its responses to the 2008–2009 Great Recession and the economic and financial turmoil created by the start of the coronavirus in 2020.