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Money, supervision, and financial stability: a money-credit constitution entrusted to independent but constrained central banks

In: Central Banks and Supervisory Architecture in Europe

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  • Paul Tucker

Abstract

"I insist that neither monetary policy nor the financial system will be well served if a central bank loses interest in, or influence over, the financial system." (Paul Volcker, 1990). Paul Volcker's words delivered just a few years after retiring from the Federal Reserve, combined wisdom with prophecy. In the years leading up to the 2007-09 Great Financial Crisis, there were two dominant international financial centres. In one, the Federal Reserve had lost interest in the financial system. In the other, the Bank of England had been stripped of its regulatory powers. Chaos ensued. This chapter is about why Volcker was right, and what that means for central banks in constitutional democracies.

Suggested Citation

  • Paul Tucker, 2022. "Money, supervision, and financial stability: a money-credit constitution entrusted to independent but constrained central banks," Chapters, in: Robert Holzmann & Fernando Restoy (ed.), Central Banks and Supervisory Architecture in Europe, chapter 13, pages 156-169, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:21354_13
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    Keywords

    Economics and Finance;

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