The Federal Reserve's Mission Conflicts, the Case of the Subprime Crisis

Document Type

Thesis

Publication Date

2010

Disciplines

Political Science | Social and Behavioral Sciences

Advisor

Matthew Lindstrom, Political Science

Abstract

Congress has gradually increased the goals and functions of the central bank of the United States-the Federal Reserve, creating a mission challenge for the institution. In light of its current mandate to maintain financial stability, mitigate financial systemic risk, and protect consumers of financial services; many have blamed the Fed for failing to prevent the financial crisis that broke out with the collapse of the subprime mortgage market in 2007. Using analytical tools from political science, public administration, and economics, this thesis seeks to explain how ambiguous and conflicting goals in the Federal Reserve's mission motivated the central bank's regulatory failures. Part of the Fed's strategic consideration was that intervening in subprime mortgage lending and securitization could have threatened its autonomy in monetary policy making through heightened public pressure and congressional oversight.

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