Vox Card Stacks: How Useful, and in What Contexts?


Comment of the Day: Jackson Hole Weblogging: Philip Wallach: Federal Reserve ad Hocracy,Precedent, and Legal Realism: In the Inbox:

On Monday, Aug 3, 2015 at 7:50 AM, Philip Wallach wrote:


Thanks for noting, via David Zaring’s post, the debate I had with Peter Conti-Brown about Lehman’s demise and the Fed’s legal powers in relation to it.

I have a small point to make it relation to your response, which is that if the question is “What can the Fed do legally?” then replying that "the Fed can do many things ultra vires" is something of a non sequitur, no?

But overall I appreciate the thrust of your post—which I do think is directly responsive to the far more important question of, “What kind of thing is the Fed and how should we understand its role during financial crises?” In terms of the economics, I think I am sold on idea that central banks should be endowed with the power to do “whatever it takes” and the independence to decide what that is. But I have some worries about the politics—i.e., how do central banks get the legitimacy to wield that tremendous power in the context of 21st century democratic political life? I think the ultra vires position is especially problematic in that light, quite apart from any convictions about whether it should be. To the average politically literate American or even member of Congress, the idea that “the Fed” is not just a part of “the government” is very hard to parse, let alone justify.

If you’re so inclined, you might enjoy some of the other blog posts I put up at the Yale Journal of Regulation Blog:

All inspired by material from my new book, To The Edge: Legality, Legitimacy, and the Responses to the 2008 Financial Crisis http://www.brookings.edu/research/books/2014/to-the-edge. I suspect you’d enjoy it, and I’m sure Brookings Press can send you a copy if you are interested.

Here’s a 10-page attempt to boil down some of the major themes http://www.brookings.edu/research/papers/2015/06/17-legitimating-finanical-crisis-adhocracy-wallach.

Best regards,


Philip Wallach, Ph.D. Fellow, Governance Studies Brookings Institution office: (202) 540-7786

I think that my point is that there is long-settled Trans-Atlantic precedent for central banks acting ultra vires in a financial crisis—and in fact getting upfront assurances, via a suspension letter from the Chancellor of the Exchequer that he would not sanction violations of the note-issue restrictions of the Recharter of 1844, that such ultra vires behavior will not be sanctioned. Whether something that the government asks you to do and promises not to sanction you for is illegal is something that the Legal Realists would probably have something to say about…

Robert Peel’s remarks around the Recharter of 1844 about just why they were writing the Recharter to forbid the Bank of England to do things in a crisis that they did, in fact, hope it would assume responsibility and do are, I think, very interesting…

How come I have not read your book already?