Here’s an interesting item from Cullen Roche’s Pragmatic Capitalism blog, making the point that the Fed does not have 2 mandates, it has 3, and the well-known 2 mandates are ranked below the unknown mandate.
It refers to Bernanke’s speech in Abu Dhabi (Bernanke haters, don’t ask how much he got paid, it will only upset you), where he says he would have liked to do more for the average person, but in doing so:
in order to help the average person, you have to do things — very distasteful things — like try to prevent some large financial companies from collapsing.”
Roche then says:
- Once you understand how the Fed is designed, it becomes clear that the Fed is really just a big clearinghouse.
- It is basically a bank for banks.
- And the way that bank helps the real economy is primarily by making sure that all the real banks, which it services, are operating smoothly.
- So the Fed’s real mandates work like this:
Maintain an orderly and stable banking system.
Maintain price stability.
Maximum employment.
