June 17, 2021

Economists to the Federal Reserve: Stop Weakening the Fed’s Credibility and Undermining its Independence by Exceeding Monetary and Regulatory Mandates

Washington, D.C. – In case you missed it, today 42 independent economists expressed concern over the Federal Reserve weakening its credibility and independence by exceeding its mandates as it delves into areas such as environmental and social policy.

In an open letter published in the National Review, the economists wrote:


“We the undersigned are deeply concerned about the changing role of the Federal Reserve. The Fed is among the nation’s most important institutions. Its monetary and regulatory mandates are essential for economic stability. However, based on recent activity, the Fed is in danger of exceeding these mandates. Unless it changes course, the Fed will impede its own effectiveness.”


The economists stated that the Fed’s direct credit allocations and growing interventions in non-economic-policy areas should be left to Congress—not the Fed.


“Worryingly, the Fed’s behavior renders it increasingly sensitive to political interference. Partisan agendas have no place in determining the Fed’s policies. Yet this is precisely what the Fed’s current operations invite. We are beginning to see the signs of a politicized Fed, as it delves into areas such as environmental and social policy. These diversions weaken the Fed’s credibility and undermine its independence.”


In March, Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) launched a review of the recent shift by regional banks of the Federal Reserve System toward publishing politically-charged research on environmental, social, and governance (ESG) topics like climate change and racial justice. To date, the Senator has requested briefings and documents from the San Francisco, Minneapolis, Boston, and Atlanta regional Federal Reserve Banks on their recent political activism, which is outside the bounds of the Fed’s mission and statutory mandate.


Full text of the open letter along with a full list of signatories can be found here or below.


A Public Letter of Concern about the Federal Reserve
By ALEXANDER WILLIAM SALTER
June 17, 2021 | 6:30 AM


We the undersigned are deeply concerned about the changing role of the Federal Reserve. The Fed is among the nation’s most important institutions. Its monetary and regulatory mandates are essential for economic stability. However, based on recent activity, the Fed is in danger of exceeding these mandates. Unless it changes course, the Fed will impede its own effectiveness.


The coronavirus pandemic put enormous strains on the U.S. economy. An aggressive response by the Fed was entirely appropriate. But its direct credit allocation and growing interventions in non-economic-policy areas have no basis in central-banking best practices. These activities are the rightful domain of Congress, not the Fed.


Worryingly, the Fed’s behavior renders it increasingly sensitive to political interference. Partisan agendas have no place in determining the Fed’s policies. Yet this is precisely what the Fed’s current operations invite. We are beginning to see the signs of a politicized Fed, as it delves into areas such as environmental and social policy. These diversions weaken the Fed’s credibility and undermine its independence.


This is not a partisan issue. Our objections would be equally strong if the Fed involved itself in industrial policy or national security. All Americans benefit from a central bank devoted to effective monetary and regulatory policy. The Fed should refocus on its core missions.


Alexander William Salter — Comparative Economics Research Fellow, Free Market Institute and Associate Professor of Economics, Rawls College of Business, Texas Tech University


Co-signatories (Institutional affiliations for identification purposes only. Signatories current as of 15 June 2021.)


Zoltan Acs — Director, Center for Entrepreneurship and Public Policy; University Professor, Schar School of Policy and Government, George Mason University


Ray Ball — Sidney Davidson Distinguished Service Professor of Accounting, University of Chicago


James T. Bennett — William P. Snavely Chair of Political Economy, George Mason University


Sanjai Bhagat — Provost Professor of Finance, University of Colorado Boulder


Peter J. Boettke — University Professor of Economics and Philosophy, George Mason University


Edwin T. Burton — Professor of Economics, University of Virginia


William N. Butos — Emeritus Professor of Economics, Trinity College


Charles Calomiris — Henry Kaufman Professor of Financial Institutions, Columbia University


Rebel A. Cole — Lynn Eminent Scholar Chaired Professor of Finance, Florida Atlantic University


Bryan Cutsinger — Assistant Professor of Economics, Angelo State University


John A. Dove — Associate Professor of Economics, Troy University


William F. Ford — Former President, Federal Reserve Bank of Atlanta


J. D. Foster — Author, Economic Policy for Future Presidents


Diana Furchtgott-Roth — Former Acting Assistant Secretary for Economic Policy, United States Department of the Treasury; Adjunct Professor, George Washington University


Robin Grier — Professor of Economics, Free Market Institute, Texas Tech University


Gerald A. Hanweck Sr. — Professor of Finance, George Mason University


Stephen Happel — Emeritus Professor of Economics, Arizona State University


Joshua Hendrickson — Associate Professor of Economics, University of Mississippi


Thomas L. Hogan — Senior Research Fellow, American Institute for Economic Research


Peter Ireland — Member, Shadow Open Market Committee; Professor of Economics, Boston College


Barry Keating — Professor of Finance, University of Notre Dame


Paul Kupiec — Resident Scholar, American Enterprise Institute


Robert Lester — Associate Professor of Economics, Colby College


Stanley Liebowitz — Ashbel Smith Professor of Managerial Economics, University of Texas at Dallas


Richard Lowery — Associate Professor of Finance, University of Texas at Austin


Donald L. Luskin — Chief Executive Officer, Trend Macrolytics LLC


William J. Luther — Director, Sound Money Project, American Institute for Economic Research; Associate Professor of Economics, Florida Atlantic University


Ronald Mau — Assistant Professor of Economics, University of Mississippi


Jack Mintz — President’s Fellow, School of Public Policy, University of Calgary


William Peirce — Emeritus Professor of Economics, Case Western Reserve University


Pedro J. Piffaut — Chief Executive Officer, Langeron Econometrics


Alex J. Pollock — Former Principal Deputy Director, Office of Financial Research United States Department of the Treasury; Distinguished Senior Fellow, R Street Institute


Mario J. Rizzo — Associate Professor of Economics, New York University


Steven Rosefielde — Professor of Economics, University of North Carolina at Chapel Hill


Anthony B. Sanders — Distinguished Professor of Finance, George Mason University


Dennis P. Sheehan — Emeritus Professor of Finance, Pennsylvania State University


Daniel J. Smith — Professor of Economics, Middle Tennessee State University


Michael Stutzer — Professor of Finance, University of Colorado Boulder


Richard Vedder — Distinguished Emeritus Professor of Economics, Ohio University


R. Christopher Whalen — Chairman, Whalen Global Advisors LLC


Robert M. Whaples — Hough Family Faculty Fellow and Professor of Economics, Wake Forest University

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