#Stephen Miran

Karen Petrou: What Treasury Wants from the Fed and Why It Should Get it

Shane Smith2025-09-08T09:29:11-04:00September 8th, 2025|The Vault|

With all the bandwidth absorbed by the Miran and Cook dramas, insufficient attention was paid late last week to Secretary Bessent’s Wall Street Journal article laying out a new monetary-policy model. I like it a lot and not just because Mr. Bessent quotes my book. As he says, we need a different monetary policy model, one that the Fed is clearly unable to develop on its own judging by the five years of work that went into the ultra-cautious 2025 fiddles with the 2020 model. Most of what Mr. Bessent wants will make the Fed better at its core mission and a more independent guardian of the public good, overdue reforms that Democrats should support.

What does reform entail? First, the Fed would adhere to its statutory mandate, not the truncated “dual” one recent Fed leadership selects in defense of its legitimacy. Secretary Bessent and Stephen Miran read all the law, not just selected passages, correctly observing that the mandate is a triple-header of maximum employment, price stability, and “moderate long-term interest rates.” Mr. Miran’s testimony cites the 1946 Full Employment Act as one source of this mandate along with the 1978 law. Current law also implores the Fed to act in concert with the federal government to further the “general welfare.” The FRB and FOMC thus have an affirmative, express duty to do all they can to reduce economic inequality, not inadvertently but significantly worsen it as has long been the case. Mr. Bessent seconds this view …

Karen Petrou: How to Redesign the Federal Reserve Banks

Shane Smith2025-09-02T09:19:51-04:00September 2nd, 2025|The Vault|

“U.S. President Donald Trump’s radical shift in economic approach has already begun to change norms, behaviors, and institutions globally. Like a major earthquake, it has given rise to new features in the landscape and rendered many existing economic structures unusable,” or so says Adam Posen at the Peterson Institute. After last week, it looks as if the Federal Reserve as it came to be known over recent decades is also on the scrap heap. It may not be “unusable,” but the uses to which it will be put are to serve Mr. Trump’s political interests, not necessarily those also of the long-term economy’s resilience, equality, or stability. The Fed deserves this due to its geriatric monetary-policy model and persistent contributions to economic inequality. I’m not so sure about the rest of us.

The transformation already under way is not just the result of the President’s unprecedented effort to dismiss a member of the Federal Reserve Board and, if the courts rule in his favor, anyone else he doesn’t like. Another profound change could come next March, when the Board must ratify the appointments of Federal Reserve Bank presidents. With a majority of members of the Board on his side, Mr. Trump could block reappointment of all twelve Reserve Bank presidents in March of next year.

The Federal Reserve Act places a rolling list of five Reserve Bank presidents on the FOMC in an effort to balance what congress feared in 1913 would be undue Wall Street influence on monetary …