Macroeconomic Policy Nexus (Macro Musings newsletter) - Latest News and Information
In this episode, host David interviews Peter Conti‑Brown about his recent essay outlining three possible reforms to the Fed‑Treasury relationship, focusing on discount‑window liquidity and its stigma. They discuss recent remarks by Fed Governor Michelle Bowman and Treasury Secretary Janet Yellen on counting discount‑window collateral toward banks’ liquidity coverage ratios, and the trade‑offs between reducing moral hazard and enhancing market discipline. Conti‑Brown argues that while expanding discount‑window use could improve crisis management and revive interbank markets, it also raises concerns about subsidizing private banks and increasing moral hazard. The conversation situates these reforms within a historically unprecedented political environment, noting the heightened pressure on the Fed in 2025.
Peter Conti‑Brown outlines three separate Fed‑Treasury accords: one freeing the Treasury from setting monetary policy, a second keeping the Fed out of partisan politics, and a third enhancing collaboration on public‑debt management. He traces the historic 1951 Accord that granted...
