Prior to the 2008 financial crisis, the Federal Reserve had a long-standing policy of maintaining a minimal footprint on the credit system. According to Selgin, the Fed use to be a “lean and mean” player in the credit system. However, on the eve of the 2008 financial crisis they made some changes to decades’ old policies that they believed would aid the financial instability of the country at the time. In retrospect, we can now deeply analyze where the Federal Reserve misstepped. 

What is the Federal Reserve? What are mandatory reserves? What is the chevron deference? What did emergency lending have to do with the 2008 financial crisis? Is the Fed more constrained than private banks?

Further Reading:

Floored!: How a Misguided Fed Experiment Deepened and Prolonged the Great Recession, written by George Selgin

Anniversary of a Fed Blunder, written by George Selgin

Interest on Excess Reserves: The Hobie Cat Effect, written by George Selgin

The Fed’s Recent Defense of Interest on Reserves, written by George Selgin

Related Content:

How the Federal Reserve Works, Free Thoughts Podcast

The Gold Standard Won’t Be Coming Back, Free Thoughts Podcast

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