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9781137578587

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The review from Brian Madigan: The Last of 'Those Marble Tower Boys!' Chairman Bernanke Capping a Century of Monetary Policy at the Fed. I enjoyed reading this book and learned a lot from it even though much of my own research is on the Federal Reserve. The book's strength comes from Lindsey's experience as an economist and close observer of monetary policy without quite being a policy maker. He was an economist at the Federal Reserve Board, Deputy Director of the Division of Monetary Affairs, and Associate Economist of the Federal Open Market Committee. He wrote A Modern History of FOMC Communication, 1975-2002, for the FOMC just before his retirement in 2004. He knows what went on, including the Fed's problems and the personalities involved, without the need to be defensive about the policies he describes. He is committed to the Fed as an institution but is able to be critical of its processes and decisions. This gives the book a different flavor from (and information beyond) those by the policy makers, such as Maisel, Larry Lindsey, Axilrod, Burns, Volcker, Greenspan, and Bernanke, or economists such as Mayer, Meltzer, and Wood. Hetzel is a Fed economist but his approach is primarily theoretical/econometric. Lindsey's occasional irreverence and humor also contribute to the book's readability. The book is well-focused, primarily (no surprise) on the 2007-09 financial crisis. The first 5 (of 14) chapters lay the groundwork with the foundation and history of the Fed, including its mistakes, particularly before and during the Great Depression of 1929-33, so that we have some understanding of the institution that was confronted by the recent crisis. This history is meant to help readers appreciate 'the book's three main theses': (1) the necessity in a democracy of a non-profit-maximizing independent central bank to serve as lender-of-last-resort, which, although its existence encourages excessive risk-taking and therefore requires more regulation, is still better than monetary policy by elected representatives with their short horizons; (2) Once the Fed had driven the shortest-term interest rate to zero (which it has been too slow to do), the episodes of large-scale purchases of securities were ineffective (referring to the Great Depression and the recent Quantitative Easing); (3) The attempts to reduce long-term rates in the face of market expectations have been failures. These theses lead up to the recent Crisis, but the most interesting and useful feature of the book is the close look at the interaction of people and ideas in the monetary policy process, always within the framework of the Fed's organization. It is not a complete analysis of the Fed's decisions in the context of a particular theory, as Friedman and Schwartz, Brunner and Meltzer, Mayer, or Keynesians would have it. Rather we learn what the people at the Fed thought in the context of their environment and history. Lindsey's discussions of the policy-making and communications processes included Wall Street Fed-watchers (who to everyone's surprise found Bernanke more difficult to understand than Greenspan; the former's attempts at transparency were confusing), members of Congress, Fed governors and former governors, Fed Bank presidents, and outside economists. The Fed's efforts to communicate its intentions to the markets (to be transparent), which was Lindsey's main interest at the Fed, are interesting, as is its failure to learn, although the latter is more implicit than otherwise. The end ('Fathoming what it all means,' the last section of the last chapter) is a bit of a letdown, in that after many discussions of what were mainly Fed failures (or quite limited successes), with few if any second thoughts, he repeats his introductory belief that, although central banks have been imposed rather than evolved (as Goodhart would have it), there is no question that independent central banks like the Fed (non-profit lenders of last resort) are necessary. I may be a little unfair here because Lindsey concentrated on difficult volatile times (albeit made more difficult and volatile by the Fed), which are more interesting than quiet times. The Fed would have looked better if he had focused on the last two decades of the 20th century - which comes in the next volume. The Rest of 'Those Marble Tower Boys!' Making Monetary Policy under Fed Chairmen Burns and Miller, Volcker, and Greenspan The approach, with its strengths, of this volume continues that of the first. The weaknesses, if so they can be called, stem from Lindsey's conviction that the Fed, for all its mistakes, is the only way to conduct monetary policy. I would not change this, however. He is not the only one and that is the price of an insider. The focus of the second volume may be even stronger than the first because the topics are fewer and perhaps simpler than the first, specifically: Sec. A. Burns and Miller Ch. 3-4 consider in detail whether the 1970s inflation was influenced by politics, based on the data and the statements and actions of Arthur Burns and others as seen from inside and outside the Fed. Ch. 5: What did Burns really mean by cost-push inflation? Ch. 6. Lindsey's view of Burns' and the FR Board's battle with Congress over the information supplied by the Fed. Sec. B. Volcker Volcker as a policymaker and communicator (better at the first than the second). Sec. C. Greenspan This is mostly about the development of transparency/information under Greenspan (actions are better than words). We learn of the many obstacles to the public's understanding of the Fed, whose statements often provoke volatility. The end of the second book (ch. 17), like the first, is not very satisfying, although it follows from the preceding discussions. The lessons which emerge from the Fed's experiences, according to Lindsey, include the overlapping: Don't let inflation get out of control because of unemployment or political pressures - which he thinks the Fed has learned [temporarily, if that, I would say]. Two further lessons which the Fed hasn't learned, he says, is that academic 'conceits' [preconceptions] are dangerous, and so are attempts (in words) to be transparent about the future. The books are well written, informative, and supply a need: the conduct of monetary policy viewed from the inside... The review from Hugh Rockoff: The Last of 'Those Marble Tower Boys!' Chairman Bernanke Capping a Century of Monetary Policy at the Fed. It is clear after reading this book that it was written by both a first-rate monetary economist and a former senior official with years of inside knowledge of monetary policy at the Federal Reserve. Only such a person could have written such an insightful analysis and provided such a balanced assessment of the history and workings of the Fed over the past century. I found the book to be well written and very interesting from beginning to end. Most importantly, the analysis throughout the book is extremely sound, with ample and appropriate citations and footnotes to relevant research. There is no other related book that I know of that covers the same topic with as much informative and understandable material over such a lengthy span of time as this one. The material covering the recent financial crisis and severe recession is especially timely and nicely donse. The book is truly in a class of its own. In addition to expressing my overall glowing opinion of the book, I would like to make a few comments in no particular order of importance for the author to consider. These are as follows. 1. It would be nice if somewhat more was said about the too-big-to-fail problem, given its importance in recent years. 2. It is stated in page 12 that '... the FOMC... will mess up a little some 20 percent of the time but screw up royally another 10 percent of the time!' Can a few examples be provided of the latter? 3. On page 20 the year should be 1791 rather than 1781 in the middle of the second paragraph. 4. Some page numbers are missing in some footnotes throughout the book. 5. The comments about personal interactions with important other financial officials are an extremely nice and interesting contribution to the book. 6. On page 59 there is a problem with '$58$'. And on page 61, 'where it has remained' should be replaced by the date. 7. Table 4.4 is a good and original addition to such a book. 8. There is a little bit of repetition on pages 63 and 68. 9. Is the statement that '... Federal Reserve personnel and conventional macroeconomists predominately see eye to eye...' too strong? Is also the statement that '... Greenspan recognized ... before anyone else on earth did...' too strong? 10. Should something be said about Bitcoins and their impact on monetary policy? 11. Should something be said about monitory policy coordination with other countries? 12. Should something more be said about the reasons the Federal Reserve did not focus enough on financial stability rather than individual bank safety and soundness until relatively recently? For example, did the Fed hire too many economists focusing on such topics as bank efficiency rather than on banking system stability? 13. The comments in the middle of page 1 about Greenspan are interesting. The same can be said about the comments about him at the bottom of page 5. 14. With respect to the housing crisis, didn't the Fed have some supervisory responsibility over mortgage brokers? 15. On page 50, the Office of Thrift Supervision is mentioned for the first time without being explained. 16. Footnote 100 on page 51 is great. So too is footnote 108 on page 58. There are many more such additions to the book that are also great but too numerous to mention here. These additions are one more distinguishing strength of the book. 17. Ata few places in the book, the author sometimes seems to come across as anti-Republican. For example, at the bottom at page 17 after mentioning some Republicans by name it is said that they 'stupidly threatened'. There are some other examples that seem to indicate the same point. Perhaps the tone could be moderated in such places unless that was the intent. 18. It might be noted in the discussion of the housing crisis that new articles recently published indicate that private-label securitizers may have sold fraudulent MBS's backed by subprime mortgages to Fannie Mae and Freddie Mac. Furthermore, the latter two agencies did not securitize subprime mortgages. 19. Some books, like Guardians of Finance: Making Regulatory Work for Us, MIT Press, 2012, place some of the blame for the financial crisis and severe recession on financial regulators. Such views are totally ignored or discounted perhaps too much in the book. Despite the nitpicking of some of these comments, the book was a pleasure to read and represents an impressive contribution to the literature to say the least. There is no comparable book covering this topic in my opinion. It is a unique and original contribution to an analysis and understanding of monitory policy at the Fed over the past century. The Rest of 'Those Marble Tower Boys!' Making Monetary Policy under Fed Chairmen Burns and Miller, Volcker, and Greenspan The second book provides a detailed treatment of monetary policy under the chairmanships of Arthur F. Burns, G. William Miller, Paul A. Volcker, and Alan Greenspan. Not surprisingly, I also found the topics covered in this book to contain solid analyses that are well-grounded in relevant research. However, I must admit that this book was interesting but far less interesting than the first book. There is far more detailed historical information than the first book, which was of less interest to me. But the material is clearly important and only available from someone with David Lindsey's knowledge and background. It might be noted in the introduction that even though some of the book draws upon material by the author that is free to available elsewhere, the book nicely ties together this material with other new material that makes for a batter and more informative read. I should note that I like the comments about the style and behavior of the individual chairman and how those characteristics affected their role at the Fed. This is a nice addition to the book. Some of my more specific comments are as follows: (1) The discussion about nominal and real interest rate on page 63 is quite interesting and good. (2) The discussion of the tradeoff between unemployment and inflation is certainly important as well as excellent, including footnote 103. (3) In footnote 130 you mention some individuals, but do not say who they are. (4) On page 87 the FINE report is discussed but you did not say whether you agree with its recommendation or not. It might be nice to know your view. (5) The comments at the top of page 127 about transcripts is an eye opener. (6) Chapter 7 is a great chapter when it comes to understanding how a key turning point in monetary policy occurs. (8) It might be nice to consider ranking the performance of the different chairman covered in the two books. (9) In the discussion of S&Ls beginning on page 69, should be some discussion of the fact that Greenspan consulted for Lincoln Savings and Loan Association? (10) A reference should be provided for the comment about Representative Ron Paul in footnote 136. (11) One my consider adding a timeline about different operating procedures that were used by the Fed. (12) I found the discussion in chapter 14 is really informative and interesting. (13) The concluding chapter seems somewhat short given the length of the book. Overall, I was truly impressed by the thoroughness and scholarship of both books in their treatment of monetary policy at the Fed over the past century. Both were a pleasure to read and I learned a great deal more than I knew after reading them. Of course, I found the first book to be more interesting given the focus of my own research.

Exceptionally well written, cogently argued, and an important contribution to monetary policy and history. - Janet Yellen

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David E. Lindsey was a 29-year veteran of the Federal Reserve Board's senior staff when he retired in 2003. He became Associate Economist of the policymaking Federal Open Market Committee in 1984 and Deputy Director of the Division of Monetary Affairs in 1987. Lindsey received his PhD from the University of Chicago in 1970, writing his thesis under Nobel Laureate Milton Friedman.

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