Inside the Fed

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Stephen Axilrod, a veteran of over thirty years at the Federal Reserve's Board of Governors, provides a unique insider perspective on the Federal Reserve System's evolution over the last fifty years. His insights are drawn from personal experiences with every Fed chairman since 1951, blending discussions of personalities with policy analysis. Axilrod examines how the distinct characteristics of various chairmen influenced their leadership abilities. For instance, he recounts Arthur Burns's struggles with political pressure from the Nixon administration and Paul Volcker's decisive pivot to anti-inflationary measures at the end of the 1970s, a shift in which Axilrod was instrumental. He also critiques the Greenspan era, highlighting the unintended consequences of increased communication from the Fed, particularly after Greenspan's infamous "irrational exuberance" remark in 1996, which damaged the Fed's credibility. Furthermore, Axilrod discusses the challenges, including the subprime crisis, that Ben Bernanke faced as he took over from Greenspan. He argues that effective leadership in monetary policy stems not just from economic expertise but also from the ability to navigate political and social obstacles to implement significant policy changes, requiring both courage and bureaucratic skill.