The Exchange Stabilization Fund: how it works

The increasingly controversial Exchange Stabilization Fund is used to influence the international value of the U.S. dollar and to provide aid to foreign countries. The debate surrounding the Fund will become more informed, the authors suggest, when observers understand how to calculate the total amount of resources available to the Fund. This Economic Commentary explains how the Fund's balance sheet figures must be adjusted to produce an accurate account of those resources.Foreign exchange

On systemically important financial institutions and progressive systemic mitigation

One of the most important issues in the regulatory reform debate is that of systemically important financial institutions. This paper proposes a framework for identifying and supervising such institutions; the framework is designed to remove the advantages they derive from becoming systemically important and to give them more time-consistent incentives. It defines criteria for classifying firms as systemically important: size (the classic doctrine of too big to let fail) and the four C’s of systemic importance (contagion, concentration, correlation, and conditions); it also discusses the concept of progressive systemic mitigation.Systemic risk ; Financial stability ; Financial institutions

The discount window

An abstract for this article is not availableDiscount window ; Federal Reserve banks

The evolution of the bank regulatory structure : a reappraisal

In his article, “The Evolution of the Bank Regulatory Structure: A Reappraisal,” F. Ward McCarthy Jr. argues that neither of these competing theories provides a sufficient explanation for the major developments in the bank regulatory framework of the United States. He proposes that the structure of bank regulation has been dictated in part by the desire of governments to enhance their abilities to generate revenue. McCarthy traces the history of government intervention in the banking industry from the colonial period through the 1930s and demonstrates that concern about public finance has been a crucial factor behind every important change in the institutional structure of bank regulation.Banks and banking

Benjamin Strong, the Federal Reserve, and the limits to interwar American nationalism

Federal Reserve System ; Federal Reserve Bank of New York ; War finance ; International finance

How Lawyers Can Help Macroeconomists in the Wake of Three Major Challenges

Macroeconomics has changed in light of both developments in the world and its internal intellectual evolution. This Article explores ways in which legal scholarship can help inform macroeconomic research and macroeconomic policymaking in light of three important developments: (i) limitations on conventional monetary policy in a world with lower equilibrium interest rates; (ii) labor markets not clearing as evidenced by persistent declines in labor force participation; and (iii) the potential for microeconomic competition policies to have major macroeconomic effects

Central Bank Activism

Today, the Federal Reserve is at a critical juncture in its evolution. Unlike any prior period in U.S. history, the Fed now faces increasing demands to expand its policy objectives to tackle a wide range of social and political problems—including climate change, inequality, and foreign and small business aid. This Article develops a framework for recognizing and identifying the problems with “central bank activism.” It refers to central bank activism as situations in which immediate public policy problems push the Fed to aggrandize its power beyond the text and purpose of its legal mandates, which Congress has established. To illustrate, this Article provides in-depth exploration of both contemporary and historic episodes of central bank activism, thus clarifying the indicia of central bank activism and drawing out the lessons that past episodes should teach us going forward. This Article urges that, while activism may be expedient in the near term, there are long-term social costs. Activism undermines the legitimacy of central bank authority, erodes central bank political independence, and ultimately renders a weaker central bank. In the end, this Article issues an urgent call to resist the allure of activism. And it places front and center the need for vibrant public discourse on the role of a central bank in American political and economic life today

FedAccounts: Digital Dollars

We are entering a new monetary era. Central banks around the world— spurred by the development of privately controlled digital currencies as well as competition from other central banks—have been studying, building, and, in some cases, issuing central bank digital currency (“CBDC”). Although digital fiat currency is one of the hottest topics in macroeconomics and central banking today, the discussion has largely overlooked the most straightforward and appealing strategy for implementing a U.S. dollar-based CBDC: expanding access to bank accounts that the Federal Reserve already offers to a small, favored set of clients. These accounts consist of entries in a digital ledger—like other digital currencies—and are extremely desirable, offering high interest, instant payments, and full government backing with no limit. But U.S. law restricts these accounts to an exclusive clientele consisting primarily of banks. Privileged access to these accounts creates a striking asymmetry at the core of our monetary framework: government-issued physical currency is available to all, but government-issued digital currency (in the form of central bank accounts) is not. This dichotomy is unwarranted. Congress should authorize the Federal Reserve to give everyone—individuals, businesses, and institutions—the option to maintain accounts at the central bank. We call these accounts FedAccounts. Unlike the CBDC approaches currently under discussion, which would use complicated and inefficient distributed ledger technology and be walled off from the existing system of money and payments, FedAccounts would be seamlessly interoperable with the mainstream payment system, relying on technologies that the Federal Reserve has used for decades

The Crisis of World Order and the Constitutive Regime of the International System

Statespersons, scholars, and commentators of every political persuasion agree that we are currently witnessing a crisis of world order. It is widely assumed that the so-called Liberal World Order that the United States constructed in the post-World War II years is collapsing. This Article interrogates and challenges this claim. This Article examines what it means to speak of world order. It argues that to understand the notion of world order, it is necessary to investigate the normative foundations of the international system. Therefore, this Article develops a theoretical construct that I call the Constitutive Regime of the International System to conceptualize the notion of world order. It argues that the international system is predicated on and governed by a Constitutive Regime that embodies a grand worldview-i.e., a theory of world order-that prescribes policies, practices, and rules of international law that are considered necessary for maintaining global order and stability. This regime, which is designed by the Great Powers of each historical epoch, shapes international and domestic politics. It determines the criteria and preconditions of statehood, thereby affecting how societies are organized and governed. It promotes certain methods for the conduct of world politics, and it establishes mechanisms for international lawmaking, thus providing the constitutive foundation of international law. A crisis of world order occurs when these basic normative assumptions about the nature of the international system and the processes of global governance are challenged. Having provided a conceptual framework for understanding the notion of world order, this Article then challenges the claim that the post-World War II Liberal World Order is currently in a period of crisis. It argues that, beginning in the 1970s, the Liberal World Order of the post-World War II era was replaced by a neoliberal world order-in other words, a neoliberal Constitutive Regime. This Article shows how this neoliberal Constitutive Regime shaped virtually every aspect of world politics and provided the normative foundation ofglobalization during the closing decades of the twentieth century. This Article concludes with a discussion of the origins of the current crisis of world order and a reflection on the future of world order in an era of increased Great Power competition