The supports of various kinds been contracted, and with the creation of large state armies, positionindeed, a re reprivatization. People that study agree this is privatization, and i concur. The independence refers to the decision in the 1990s to pull back from its promise to take care of its own, and, instead, emphasize, in many of its support programs, selfsufficiency, and that came through retooling programs like Family Support into family readiness, for example. Readiness and pulling back then on the amount of support often. It came through a new program called army family team building, which emphasized very much the responsibility of spouses and families to serve the military and know the military, rather than to have a army helping them, and through a variety of other things. I mean, today, i see the echoes of it in the emphasis on resilience, frankly. So, we can talk more about that, because i think we are running out of time, but i think it is a very important seeing in military social welfare. Note, we have to draw this to a close. The conversations can continue at a reception afterwards. Please note the book is available outside for purchase. Join us next week for our final session one albert jones of Saint Anthonys college, oxford talks about crimes against the security of the nation, world war ii, the cold war, and the evolution of mexicos antisedition laws. Thank you to our audience, thank you to jennifer mittelstadt. [applause] [captions Copyright National cable satellite corp. 2016] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] on cspan, live coverage of Public Policy in the Nations Capital continues. We will take you to the American Enterprise institute. They are beginning the discussion on the evolution of the Federal Reserve since its inception in 1913. We will hear about what his current role is, and what changes americans can expect that the fed in the future. Not only having worked at the Federal Reserve, but having had lunch, many, many times talking history, i have followed closely over time the message transformation that has occurred at the fed, not only just since the financial crisis, but over my lifetime and before, and to think the first 10 years of my life we were on the Gold Standard, you know, it suggests that things have changed a lot. So, when a friend at the wall street journal, called up to ask if i would review a new book by a Young University of pennsylvania professor called the power and independence of the Federal Reserve, i jumped at the chance because of two things. I really do love the fed. I think it has had a positive impact on my professional life and it is an important place in washington filled with people who want to do the right thing. They sometimes fail, but i love the spirit of the fed. The second thing is i noticed not many people have been writing books on the fed. Wrote two parts of a threevolume history of the Federal Reserve. Hisof the reasons is history is such that comes in the journal. I likened his work to give in, and it is true. Alanou go outside the realm existed in in Federal Reserve history, there is a lot of weird conspiracy history going on. If youre going to start to think critically about the fed and even say hey, this isnt what they were designed to do, you will have a lot of people walking down that path with you that you wish were not there with you. So, i think a must because thinking about is what the fed doing constitutional, is it the case that the founders thought this might what they might be doing as soon as you Start Talking about stuff like that, you can start to look like a crackpot. Peters defense is to write this incredible, scholarly, thoughtful book about what has happened to the fed since 1913, not from the perspective like from, an economist, but the perspective of an attorney and legal historian, who thinks about whether the thing youre doing you have the Legal Authority to do, and so on. So, peter was kind enough to agree to come and to tell us as he spent the last i would guess the last five or six years, it looks like to me, working on his own Federal Reserve history, and after he does that for about 25 minutes, we are blessed to hear from two my former colleagues, the two i couldnt if i were to have a dream came jim team to discuss this if i can get Alan Greenspan to join the panel, it will this is what the dream team would look like. Alex pollock, and of course, etzler. Generalopen up for conversation at 6 30 p. M. We will finish promptly at 7 p. M. , and well have a reception where peter will be sending and sending selling and signing books. With that, peter county brown. Mr. Brown it is such a pleasure to be with you today, thank you, kevin, for organizing this event. When i was last here to talk fed, i joked that you would invite a democrat into your institute, and that was a evencularly lame joke, someone who was going to injuries a talk about central banking. Jokes can be lame and still get a life. Hat is especially lame because aei is a place where can talk about serious things despite the priors, and despite the huge results of the republican primary, i might be the only one voting democrat in this. I had a lot of hilarious donald my good, but taste will counsel toward morse about it. I have a lot more to say substantively about what a Trump Presidency would look like for the fed and fed independence. It is also a special honor because im sharing the day with alex pollock and Kevin Hassett, but also allan meltzer. For a young historian, there is no greater honor than to have my work engaged by professor called theo kevin given of fed historians. Hopefully my buttering up the panel will dull the critiques in the discussion after my talk. This is probably a loss hope. False hope. Metzler, heows alan is not one to pull punches, and we have a few disagreements. Kevin asked has the fed gone too far. I am going to make a somewhat different point, and raise some related preliminary questions. What is the fed today, and what is the best mechanism for mechanisms for ensuring that the fed is the central bank he wanted to be . Reframing this argument, i am following a tradition that started with this man walter badgett. If you get nothing else from the presentation it is how to pronounce this young mans name. Walter bagehot. You are welcome. Thank you for the one person who watches nba basketball. Curry google steph highlights. You will thank me for it. He is famous because of a book that he wrote in the 1860s called lombard street. Sometimes unjustly and mistakingly credited with introducing a novel theory of central banking and its emergency lending funds, but the book is much more in favor of Central Bank Transparency and governance, topics i will have more to say about in todays talk, but in his introduction to this important volume, he starts by talking about the subject of the bank of england, that it inspired a lot of existential certainty among interlocutors. I do not know if you can see that well, but in his words, two the sameal dispute ask are you with us, were against us, and they care for little else. I give you my word that nothing has changed from 1870 32 2016, 2016. 73 to away,st question, far and when people learn i have written a book about the fed is the same are you for it or are you against it. With todays talk in the book itself is to push past that. One need to only look at the forthof books that poured from Printing Presses to get a sense of this phenomenon. Not all books are given the historys state as they as the history of the Federal Reserve, and i have glad your Kevin Hassett calling out our dear professor metzler in writing three volumes and calling it two. Some have more scintillating scintillating titles the secrets of the Federal Reserve, thisf of conspiracy is actually a good book. Favorite title, do they think they walk on water the fed chairman and the Federal Reserve. Parts most of these equal ignorance and bad writing, there is a sense that the levers of total power the economy and the country, even with very serious, and again, work of the temple is a serious book in journalism. We get other books that are much better regarded. Central bankers are lords of finance. Arguments, i see david here. Central bankers are god, i guess, and in any case, the only got game in town. I will bring a picture that might hurt you a little bit to see and pine for a past that did not become the future senator rand paul would find at least a somewhat receptive audience with a question that kicked off his campaign, anybody feel that the fed is out to get us . Powerful,omething sinister, about the institutions that control our money, and these questions are as old as the republic itself. It was a battle between commerce jefferson and Alexander Hamilton a battle between Andrew Jackson and the lesserknown nicholas biddle, and the commoner William Jennings bryan, and the heartmoney republican, william mckinley. The last one is less remember. Musicalthe hamlet success will lead to a new remake that will focus on the story, but regardless, this idea, this contest, this feeling that institutions control our economy, our institutions political and economic, is a very old one. Now, it is tempting to think just as the question, why does this conspiratorial idea exists it is not just the idea that money is controlled by these institutions that prompts the conspiracies. Maybe it is just because what the fed does is outside of the usual conversations people have day to day. Detective thinks the fed does, the words not roll off the tongue over the dinner table, likewith important things h or threats, forward guidance, quantitative easing what are these things. It is too technical, perhaps. There is a law clerk on the d. C. Circuit we called interacting with the technical jargon of administrative agencies administrative law. It happens everywhere. Two cases in first chambers. Im not sure if judge williams does. They are both on the clean air act, and good grief, i still havent recovered. This multiplies across substantive rounds, whether were talking about securities law, communications policy, the mother lode of them all, federal. Nergy policy the law of bureaucracy is a technical one, so there is nothing special about the fed in this respect. So, to give you another cover of another book, this handsome volume that some of you i hope more of you after the talk is over will have in front of you i think the reason why so much of what the fed does and is inspires smart people to ask questions, and when they do not have the answers, to the nonconspiracy theories, comes in this title of the book both from its extraordinary exceptionalts independence. As powerful, and as independent, as the sec, epa, is, there is a reason why the fed chair is sometimes called the second most powerful person in the United States after the president , or as some have said the second most powerful person in the world after pope francis. It is not power alone. It is independence. Today i want to peel back some of the mystery behind that term, independence, and i want to push back with Walter Bagehot against some of the certainty of the interlocutors, who want to know where each of us stand are you for the fed or against it . Perhaps we can ask carter questions what is the fed, and what do we mean by this term independence. It is ubiquitous in the discussions of the fed. Today, i want to talk more about what that is. We have a standard account. We use it to describe independence and justify it at the central bank. It goes Something Like this that independence is a legal separation between politicians usually talk about a president facing a National Electorate and central bankers usually mean the fed chair and the reason for the separation is so the fed chair can use purely technocratic tools and skills of macroeconomics to keep inflation low. Now, the president also has an interest, sometimes, in keeping inflation low, at least generically, but the president , perhaps, as a bigger interest in reelection, or maintain a legacy. When he or she has to choose legacy,reelection, enough inflation will go out the window. Created to bank is prevent the president and other politicians from goosing the indy the economy. Contractlysses reminding me of odysseus. Comeslysses contract because ulysses decided this desire to hear the sirens without destroying himself, his men, it is ship. Banker oarsmen with beeswax, also made of law and macroeconomics, and we stuff that legal and economic beeswax in their years so they can guide the ship to a land of Economic Prosperity with low inflation. We, the people, by the way, are the sirens in this metaphor. Fast forward to a new millennia, and we get a different, more pervasive metaphor, from the fed chair william martin. He says the fed is in the position of the shopper who has ordered the punch bowl removed just when the party was really warming up. Interestingly, though not inappropriately, given the past decade, it is much easier when you google punch bowl to find people spiking the punch as opposed to taking the punch bowl away, but that is a general idea the fed chair is interested in keeping us in the party, but not letting it get too far out of control. Theulysses chevron model of chaperone model of the fed independence one the law is doing the work, the president is trying to influence the fed, the fed is a single entity, the work of central banking is purely technocratic, devoid of values, judgment, or ideology, and last, the fed is this primarily or exclusively for price stability. This model is wrong. Here is where professor melzers years are perking up and the debate will be joined. Sometimes the model is wrong because it is incomplete. Sometimes it is wrong just because it is wrong. So, if the ulysses chaperoned model is wrong, what is right, and that is what my book is about. First, the fed is a they and not an it. The fed chair matters, no question about it, but the internal governance of the fed reveals there is so much else going on with to set the parameters within which the fed operates with participation from governors, were themselves political appointees, other members of the federal open market committee, reserve Bank President s, not talked to by the feds,nt, and including especially economists and lawyers, especially bank examiners. Second, the president matters. No question about it, but so, too, does congress, bankers, financial markets, academic economists, and many others, focus others. Focusing exclusively on the president as the outside influence or or attempted influencer misses how the fed makes policy. Third, law matters. By law, we mean the Federal Reserve act. Low matters much less than we think. I will give some examples in a moment. The bottom line is the idea that law creates independence is mostly false, and, indeed, law sometimes is the very opposite of what we have been saying it does, as far as insulating the fed from political imaginations. Imaginations. Ideologyleadership and matter enormous amount about the way the fed interacts with these outside audiences. Fourth, the idea that fed independence can only be justified in terms of price stability this is a curious assertion, and it is serious because of the intellectual history of Central Bank Independence and price stability. It arises in a moment of the late 1970s that extends to just before the financial crisis in the mid2000s. The idea of price stability arose as Central Banks participated in a can successful experiment at combating inflation, while simultaneously the intellectual apparatus developed by the great economist, political scientists, macroeconomists, political scientist ironically, at the same time in United States, the Federal Reserve act was amended to give the fed would we often call a dual mandate. It is actually triple mandate of price stability, maximum inflation, and lower, longterm Interest Rates. So, when we add that to the mix of its financial regulatory functions, Bank Supervisory function, its supervision of the patent system, Systemic Risk regulation and lending authority, you see that the fed is a multifunctioning entity. Most provocatively to my central banking friends, the idea that central banking is purely the work of technocrats is also false. This is not to say that Technical Training is irrelevant. Very far from it. Point is that the most interesting and indeed questions a central banker will face are also technical apparatus is exhausted. After technical and chronic consensus has broken technocratic consensus is broken down, there is a gap between that breakdown and the point at which decisions are quite. Its raises the question, what fills the gap . You can say central bankers are making decisions because they are where they are stupid, but i think the softer reality and the better reality is that they are making these decisions, not because they dont understand the question as well as you do, but because that gap is being filled by a different worldview, different values. To use a word central bankers hate, a different ideology. The reason i say central bankers hate it, thats the part i hated was the idea that central bankers are doing anything ideological. When im saying they are ideological, i am saying they are human. I am not saying that they are partisan, trying to mak