ABSTRACT
With the Financial Modernization Act (or “Gramm-Leach-Bliley Act”) of 1999, the involvement of the Federal Reserve in the financial system increased tremendously. The Fed has become “the umbrella holding company supervisor” and all federal and state regulators were brought under the oversight of the Federal Reserve System. However, members of the Federal Open Market Committee (FOMC) have still in mind a model of the world, in which financial matters are of secondary importance relative to real matters. In addition, they are more or less suspicious about the capacity of a central bank to fine-tune the economy and agree that a central bank should be mainly concerned with the long-term goal of price stability, the latter promoting sustainable growth and financial stability. However, FOMC members, as well as other central bankers, are involved heavily in the finetuning of the economy “to a degree that was previously unimaginable, even during the golden age of Keynesian macroeconomics in the 1950s and 1960s” (Dalziel 2002: 519).
