In the seventh chapter of “Across the Great Divide: New Perspectives on the Financial Crisis,” Peter Fisher argues that the Fed’s mandate should be reviewed:
- The Fed did not address leverage early enough. In the future, monetary policy should weigh financial stability objectives more strongly—at the cost of employment and inflation objectives.
- Moral hazard should be addressed before, not during the crisis.
- “Since the end of the financial crisis, the Fed is making the mistake of conceiving of its mandate over too short—and too narrow—a horizon. This permits the Fed to avoid articulating the difficult intertemporal trade-offs that it is making.”
- The Fed’s mandate is not crystal clear and has been interpreted differently over the years. In light of the new experiences, it should be clarified or adjusted.