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Economist Frederic S. Mishkin talks about “A Day At The Fed” in Santagata lecture

February 16, 2024

On Monday night, economist Frederic S. Mishkin delivered this spring’s Kenneth V. Santagata Memorial Lecture in Kresge Auditorium, titled, “A Day At the Fed.” Mishkin, a professor at Columbia University, discussed his experience as a governor on the Federal Reserve System (the Fed)’s Board of Governors as well as his perspective on the Fed’s recent policies and responses to financial crises.

Following an introduction by President Safa Zaki, Mishkin first explained how he became interested in economics after hearing about life during the Great Depression from his father.

“The thing that he always talked about was his experience during the Great Depression,” Mishkin said. “It meant that I really wanted to understand what happened and could we [have] prevent[ed] it.”

Mishkin then gave an overview of what the Fed does as the central bank of the United States, both in times of crisis and stability. He detailed its structure with a Board of Governors and 12 Federal Reserve Banks, and its decentralized roots in the early stages of U.S. democracy.

“The United States has always been a country that actually doesn’t like centralization too much,” Mishkin said. “We actually were one of the last countries to get a central bank because there was a concern about putting power in a centralized organization.”

Mishkin also discussed the Fed’s independence from direct government control, noting its benefits and shortcomings. According to Mishkin, because the Fed is not funded through Congress, its decision-making is mostly isolated from the short-term desires of politicians. But, its independence also means there can be a lack of accountability when the agency does make mistakes.

“The question is, how do you design things to actually make the agency accountable? And on the other hand, actually meet the goals of the public and the politicians, but still have independence to basically operate on a day to day basis?” Mishkin said.

Mishkin returned to this topic later in his lecture when discussing recent challenges to the Fed’s independence under former President Donald Trump. While Mishkin asserted that the Fed was able to maintain its independence thanks to the leadership of then-Chair Jerome Powell, the political element to the Fed’s work stood out to attendees, including Gary Ruiz Hernandez ’27.

“The Federal Reserve is much more political than it seems to be,” Hernandez said.

Mishkin also evaluated recent policy efforts by the Fed both in establishing financial stability and the monetary system by using a traditional academic letter grade system. Mishkin assigned the Fed an overall grade of “B” in both categories, but also graded specific responses to two recent financial crises—the Great Recession in 2007–2008 and the Covid-19 pandemic—which Mishkin granted a B plus and an A plus, respectively.

After the talk, attendees lined up to ask questions on topics ranging from the Fed’s independence to how it might respond to a war breaking out. Of particular interest to attendees was his time spent at the Fed, including his interactions with different chairs of the Board of Governors.

“The best part was probably his experience with individual members of the Fed because you can get the monetary policy and mass systems from textbooks and stuff,” Sam Lieman ’27 said. “But hearing the stories about Jerome Powell, [former Chair of the Federal Reserve] Ben Bernanke, I wasn’t really expecting that.”

Associate Professor of Economics Matthew Botsch explained that the content of Mishkin’s talk is relevant to many students, regardless of major, reflecting the intent of the Santagata lectures.

“The role of the Fed in the economy is critically important. It affects everything,” Botsch said. “The Fed is the institution that sets interest rates. Interest rates affect things like what you’re paying on your credit card, what you’re paying when you buy a car … so understanding not just how the Fed affects the economy, but how the Fed makes these important decisions … is of interest to everybody.”


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