RESUMO
We provide an initial assessment of the Federal Reserve's policy response to the COVID-19 contraction. We briefly review the historical episode and consider the standard textbook treatment of a pandemic on the macroeconomy. We summarize and then evaluate the Fed's monetary and emergency lending policies through the end of 2020. We credit the Fed with promoting monetary stability while maintaining that it could have done more. We argue that the Fed could have achieved stability without employing its emergency lending facilities. Although some facilities likely helped to promote general liquidity, others were primarily intended to allocate credit, which blurs the line between monetary and fiscal policy. These credit allocation facilities were unwarranted and unwise.
RESUMO
The Federal Reserve is exposed to a greater degree of political influence under its new operating regime. We survey the relevant literature and describe the Fed's new operating regime. Then we explain how the regime change reduced de facto central bank independence. In brief, the regime change increased the appointment power of the President and improved the bargaining power of Congress. We offer some suggestions for bolstering de facto independence at the Fed.