This is the Cato Daily Podcast for Monday, May 31st, 2021. I'm Caleb Brown.

What would a credible monetary rule look like if designed by Congress or by the Federal Reserve itself.

Can the generalists in Congress really provide credible oversight to the specialists at the

Fed?

Alex Salter is co-author of money and the rule of law, generality and predictability in monetary

institutions available now.

The last, oh, 12 years or so of Fed policy have been pretty remarkable and I don't know if you'd call

it unpressed at it or not but certainly the Fed balance sheets exploded in 2008, 2009, and not really back to where we were before.

And with a global pandemic now, it's very difficult to foresee a lot of things that we might have been able to foresee,

but with respect to how the Fed has responded to this pandemic and how they respond to other crises, what ought to govern?

That's the question of the day.

I think that we need to look at strict monetary rules.

I think the Fed has been trust, has shown that it cannot actually be trusted with last resort lending.

I'll give you an example just from the most recent COVID crisis. The Fed does have

statutory authority to make direct loans to financial institutions,

provided that it's doing so to maintain the integrity of the financial system.

The Federal Reserve went above and beyond that by any reasonable measure in the

COVID crisis and started making direct loans to large

corporations that were not in the financial sector, Coca-Cola, Berkshire Hathaway, and they came up with

a really torture argument about how this was consistent with their Section 33

Authority under the Federal Reserve Act. And I think that this vindicates a lot of the

old school monetarist arguments that we really don't need a last resort lender

...