Public Credit Allocation through the Federal Reserve: Why It Is Needed; How It Should Be Done

CIlAPTER SUMMARY This chapter outlines a comprehensive restructuring program for the Federal Reserve System, giving it broad authority in the area of credit allocation. Undertaking a structural overhaul of the Federal Reserve in aperiod of pervasive financial problems is consonant with the evolution of central banking in the United States. In this proposal, the central bank would still be responsible for short-term money and interest rate management, but its relative focus would shift to long-term promotion of productive investment, financial stabilization, and sustainable growth. Equally important, the extent to which the Fed's activities are accountable to democratic processes would increase dramatically.