Question

We noticed that the 2007-2009 financial crisis raised a series of important questions about the financial system. Following the financial crisis, Congress debated the issue of reducing the independence of the Federal Reserve System. Should Congress and the president be given greater authority over the Federal Reserve System? Why or why not? Explain your reasoning in detail

Answer 1

Key points are as follows:

• It is evident the Federal Reserve System was also responsible for the financial crisis of 2007-2008 but there were other failures too that lead to the Financial Crisis.
• I believe that putting the whole blame on the Federal Reserve Bank is not appropriate.  
• The independence of the central bank is very important for a country as it is responsible to maintain the inflation rates and the money supply in the economy.
• If the ruling political party, which forms the government, has control over the central bank then it can easily manipulate and take decisions that are beneficial to it instead of the country.
• For example, when elections will be approaching, the government would want to have high growth in the economy. If it has control over the central bank, it would lower the interest rates irrespective of the level of inflation in the economy.
• Thus, according to me Congress and the President should not have greater control over the Federal Reserve System.