Heroism in Banking Regulation – James E. Hartley

The Federal Reserve , created in 1913 , is one of the oldest of these independent regulatory agencies.

The size and composition of the Fed ’s assets raises alarms.

The Fed has spent more than it has received in revenue in the last two years .

The regulatory problems the Fed faced in the 1920s can give great insight into the role of regulatory agencies today .

The Federal Reserve Bank of Dallas lost $ 500,000 on a single loan in 1923 (the equivalent of $9.1 million today ) In Salt Lake City , McCornick and Co. suddenly found itself in crisis after the death of its founder.

After the Fed got involved, portions of the assets of the bank were absorbed by other banks, but the Fed itself acquired a large array of loans with dubious prospects of being repaid.

The Kansas City Fed ended up consistently providing loans to the bank from 1921 to 1926 .

The problems the 1920s regulators faced were orders of magnitude simpler than modern bank regulators.

The Trump Administration’s executive order seeking to strip the Federal Reserve of its regulatory independence may have unintended consequences.

Blunt executive orders are not a good way to improve decision making in inherently complicated matters.