Fed has starring role in 'Return to Jekyll Island'

By Neil Irwin

(Photo Credit: Andrew Harrer/Bloomberg)



By Neil Irwin

JEKYLL ISLAND, Ga. -- After making their most significant monetary policy decision in quite a long time earlier this week, top officials of the Federal Reserve are now set to turn their attention to some big-picture questions about their institution: Where has it been? How did it get here? And where is it going?

They are gathering this weekend at the very resort on the Georgia coast where 100 years ago a group of bankers and finance experts met to craft what would eventually become the Federal Reserve System.

Indeed, the 1910 Jekyll Island gathering has long been viewed by conspiracy theorists as the root of what they consider to be the central bank's shadowy, elitist ways. There is even a Fed-bashing book called "The Creature from Jekyll Island."

Now, the Federal Reserve Bank of Atlanta is hosting a conference titled "Return to Jekyll Island." It may sound like the sequel to a bad horror movie, but it is in fact a meeting that aims to examine the full scope of the Fed's history (see the agenda here).

I expect some interesting discussion of Fed highlights (the Great Moderation of 1983-2007) and lowlights (the Great Depression of the 1930s, the Great Inflation of the 1970s), as well as of the period for which it is too soon to reach firm historical conclusions (the Great Recession of 2007-2009, and the Fed's actions that kept it from being much worse).

The meeting comes at a particularly fraught moment for the central bank, which this week launched a new round of unconventional monetary policy with plans to buy $600 billion in Treasury bonds. The widely discussed strategy, known as "quantitative easing," is aimed at lowering interest rates across the U.S. economy and reinvigorating sluggish growth.

The biggest attraction of the conference will be a Saturday morning panel discussion in which Fed Chairman Ben S. Bernanke, his predecessor, Alan Greenspan, and former New York Fed President Gerald Corrigan will discuss the central bank's "purpose, structure, and functions."

The Atlanta Fed organizers deserve particular credit for their choice of moderator for that panel: It is University of Chicago economist Raghuram Rajan. Rajan, author of the new book "Fault Lines" on the factors that led to the financial crisis. He famously offered the strongest challenge to the prevailing orthodoxy on the Greenspan era at the 2005 Jackson Hole conference that was largely dedicated to honoring the Fed chairman. He wrote presciently of poor incentives in the financial industry that could bring about a new bout of financial instability. The country and the world might be better off today had the policymakers in the room taken his ideas more seriously.

Unlike a century ago, there are plenty of journalists here to observe the goings-on. Look here for continuing coverage of the conference on Friday and Saturday.