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Once Bitten, Twice Shy: Rethinking the Federal Reserve's Independence and Monetary Policy in the U.S.

Prabakaran, Niveditha (2011) Once Bitten, Twice Shy: Rethinking the Federal Reserve's Independence and Monetary Policy in the U.S. Undergraduate Thesis, University of Pittsburgh.

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    Abstract

    It is widely believed that the Federal Reserve played a central role in bringing about the biggest catastrophe in American history—the Great Depression. The literature is extensive in seeking to provide an explanation for the Federal Reserve's policy errors. This paper offers a new interpretation on why such an event occurred by studying a heretofore-unexamined landmark court case. In 1928, a private citizen filed suit against the Federal Reserve Bank of New York for increasing discount rates; he sough a court injunction that would force the Federal Reserve to decrease rates. The courts found in the System's favor. In 1929, he appealed the case, which was dismissed due to a failure in enjoining the Federal Reserve Board as an indispensible party. The judge during the time further wrote an opinion, in which he clarified that the Board rather than the Banks had true authority within the Federal Reserve System. This paper looks at how these two decisions affected Federal Reserve policy between 1929-1933. It argues that the de-politicization of the Federal Reserve coupled with implicit judicial sanction allowed it to act on its flawed ideology without fear of political recrimination. The paper also examines the impact of the Great Depression on the Federal Reserve's independence today.


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    Item Type: University of Pittsburgh ETD
    Creators/Authors:
    CreatorsEmailORCID
    Prabakaran, Nivedithanip10@pitt.edu
    ETD Committee:
    ETD Committee TypeCommittee MemberEmailORCID
    Committee ChairTroesken, Wernertroesken@pitt.edu
    Committee MemberBurnham, Jamesburnham@duq.edu
    Committee MemberHusted, Stevenhusted1@pitt.edu
    Committee MemberRawski, Thomastgrawski@pitt.edu
    Title: Once Bitten, Twice Shy: Rethinking the Federal Reserve's Independence and Monetary Policy in the U.S.
    Status: Unpublished
    Abstract: It is widely believed that the Federal Reserve played a central role in bringing about the biggest catastrophe in American history—the Great Depression. The literature is extensive in seeking to provide an explanation for the Federal Reserve's policy errors. This paper offers a new interpretation on why such an event occurred by studying a heretofore-unexamined landmark court case. In 1928, a private citizen filed suit against the Federal Reserve Bank of New York for increasing discount rates; he sough a court injunction that would force the Federal Reserve to decrease rates. The courts found in the System's favor. In 1929, he appealed the case, which was dismissed due to a failure in enjoining the Federal Reserve Board as an indispensible party. The judge during the time further wrote an opinion, in which he clarified that the Board rather than the Banks had true authority within the Federal Reserve System. This paper looks at how these two decisions affected Federal Reserve policy between 1929-1933. It argues that the de-politicization of the Federal Reserve coupled with implicit judicial sanction allowed it to act on its flawed ideology without fear of political recrimination. The paper also examines the impact of the Great Depression on the Federal Reserve's independence today.
    Date: 10 May 2011
    Date Type: Completion
    Defense Date: 20 April 2011
    Approval Date: 10 May 2011
    Submission Date: 22 April 2011
    Access Restriction: No restriction; The work is available for access worldwide immediately.
    Patent pending: No
    Institution: University of Pittsburgh
    Thesis Type: Undergraduate Thesis
    Refereed: Yes
    Degree: BPhil - Bachelor of Philosophy
    URN: etd-04222011-025027
    Uncontrolled Keywords: Central Bank Independence; Federal Reserve; Monetary Policy; Constitutionality of Fed; Great Depression; Legal History of Money
    Schools and Programs: University Honors College
    Date Deposited: 10 Nov 2011 14:41
    Last Modified: 30 May 2012 12:51
    Other ID: http://etd.library.pitt.edu/ETD/available/etd-04222011-025027/, etd-04222011-025027

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