This is the Cato Daily Podcast for Wednesday, February 25, 2015.

I'm Caleb Brown.

The Federal Reserve faces increasing scrutiny for its shift from monetary policy into credit allocation.

Lawrence White is editor of a new Cato Institute volume, Renewing the Search for a Monetary

Constitution.

We spoke following an event for the book held today.

Where are we right now with respect to understanding of the Federal Reserve having perhaps too much discretion.

It seems like a few years ago, Ron Paul was essentially the only guy really making this argument.

And now there are several people in Congress who are making the argument that we should probe a little more deeply into how the Fed does what it does.

Yeah, I find that very encouraging.

We've got people talking about having a new National Monetary Commission, which would be like the National

Monetary Commission of 1910 that examined what was wrong with the financial system

and how to fix it, what was wrong with the banking system and how to fix it.

Unfortunately, they came up with the Federal Reserve System, but we've just had a financial crisis that should force us to re-examine what the Fed's been doing.

I think the evidence is pretty strong that the Fed was a major catalyst to the housing bubble

that collapsed and gave us the financial crisis.

And so people are starting to discuss ways to constrain the Fed's activities.

And there are lots of options, so there's lots to discuss.

We can't go backward, and perhaps we don't want to, but what should our monetary system look like,

and what do you mean when you say monetary constitution?

So a monetary constitution can be thought of as having two features.

One is specifying what the government may do with respect to money,

...