What do you think?
Rate this book
Columbia Global Reports
The Fed Unbound: Central Banking in a Time of Crisis
Do the Fed’s efforts to stabilize the economy worsen inequality?
The Federal Reserve, the U.S. central bank, was built for a monetary system composed primarily of investor-owned, government-chartered banks. But over the years, the erosion of banking law and the rise of alternative forms of money created outside of the banking system have pushed the Fed to take on more and more responsibilities to keep the economy out of recession, as it did during the 2008 crisis, and again during the first months of the COVID-19 pandemic, when it created $3 trillion to stop another financial panic.
Legal scholar and former Treasury official Lev Menand explains how the Fed did this, and argues that it is time to cure the disease that has plagued the American economy for decades, and not just rely on the Fed to treat its symptoms. The Fed Unbound is an urgent appeal to Congress to reform the U.S. economic and financial infrastructure.
The Federal Reserve, the U.S. central bank, was built for a monetary system composed primarily of investor-owned, government-chartered banks. But over the years, the erosion of banking law and the rise of alternative forms of money created outside of the banking system have pushed the Fed to take on more and more responsibilities to keep the economy out of recession, as it did during the 2008 crisis, and again during the first months of the COVID-19 pandemic, when it created $3 trillion to stop another financial panic.
Legal scholar and former Treasury official Lev Menand explains how the Fed did this, and argues that it is time to cure the disease that has plagued the American economy for decades, and not just rely on the Fed to treat its symptoms. The Fed Unbound is an urgent appeal to Congress to reform the U.S. economic and financial infrastructure.
176 pages, Paperback
First published January 1, 2022
52 people are currently reading
379 people want to read
About the author
Lev Menand
2 books3 followersLev Menand is Associate Professor of Law at Columbia Law School. His research focuses on money and banking, central banking, financial regulation, administrative law, separation of powers, corporate governance, and the history of economic thought.
Ratings & Reviews
Friends & Following
Create a free account to discover what your friends think of this book!
Community Reviews
Displaying 1 - 12 of 12 reviews
June 6, 2023
Le livre avec lequel j'aurais aimé commencer à comprendre la raison d'être de la FED.
D'une institution dont la genèse était liée à des besoins nationaux, elle s'est transformée en prêteur de dernier ressort mondial (FED unbound).
Pourquoi?
Parce que la demande de dollars hors de sa juridiction a, entre autres, mené à la création de shadow bank. Des institutions qui ont un impact systémique (too big to fail) sur l'économie mondiale par la création de ces nouvelles formes de dollars dont la quantité semble très difficile à estimer. Ils ont donc la capacité de créer et contracter une portion importante de la masse monétaire sous le radar de la FED. Un enjeu qui n'en serait pas un si ce marché pouvait se réguler lui-même, mais force est de constater avec 2008 et 2020 que ce n'est pas le cas...
Ils sont donc "sauvé" par la FED (aléa moral) même s'ils sont hors du système légal dont l'objectif est d'orienter la création monétaire vers le "bien commun".
Il en découle un sauvetage qui favorise ceux qui ont des actifs et plus largement la haute finance parce que la FED ne semble légalement pas pouvoir faire autrement. Un constat qui ne vous surprendra pas, mais dont la description vous permettra de comprendre pourquoi ce type de système a émergé.
Mais loin d'abandonner le lecteur sur une conclusion sombre, Menand présente plusieurs possibilités d'améliorations, dont le soutien direct de l'économie réelle, sans passer par la plomberie financière classique et le rapatriement de la création monétaire entre les mains du politique.
Des solutions qu'il faut s'approprier si nous voulons réalistement nous attaquer aux inégalités.
D'une institution dont la genèse était liée à des besoins nationaux, elle s'est transformée en prêteur de dernier ressort mondial (FED unbound).
Pourquoi?
Parce que la demande de dollars hors de sa juridiction a, entre autres, mené à la création de shadow bank. Des institutions qui ont un impact systémique (too big to fail) sur l'économie mondiale par la création de ces nouvelles formes de dollars dont la quantité semble très difficile à estimer. Ils ont donc la capacité de créer et contracter une portion importante de la masse monétaire sous le radar de la FED. Un enjeu qui n'en serait pas un si ce marché pouvait se réguler lui-même, mais force est de constater avec 2008 et 2020 que ce n'est pas le cas...
Ils sont donc "sauvé" par la FED (aléa moral) même s'ils sont hors du système légal dont l'objectif est d'orienter la création monétaire vers le "bien commun".
Il en découle un sauvetage qui favorise ceux qui ont des actifs et plus largement la haute finance parce que la FED ne semble légalement pas pouvoir faire autrement. Un constat qui ne vous surprendra pas, mais dont la description vous permettra de comprendre pourquoi ce type de système a émergé.
Mais loin d'abandonner le lecteur sur une conclusion sombre, Menand présente plusieurs possibilités d'améliorations, dont le soutien direct de l'économie réelle, sans passer par la plomberie financière classique et le rapatriement de la création monétaire entre les mains du politique.
Des solutions qu'il faut s'approprier si nous voulons réalistement nous attaquer aux inégalités.
August 3, 2022
The author occasionally gets a little lost in the weeds, but this is an extremely helpful book and invaluable resource for understanding the history of the Fed and its revolutionary approaches to the '08 crash and the coronavirus. If I understand correctly, Menand argues that the Fed's massive program of money creation (by way of QE and other debt and asset purchases in the spring of 2020) brought the American economy back from the brink, but in so doing, exacerbated economic inequality by artificially inflating the value of homes, stocks, bonds, and other assets.
Unfortunately, Menand doesn't discuss the potentially inflationary consequences of the Fed's huge liquidity program. He does, however, make a forceful case against relying on the Fed to achieve policy objectives rather than legislating them. While the Fed does have a myriad tools at its disposal for mitigating recessions, climate change, and other issues, we can't risk the creation of another Supreme Court-like institution: an all-powerful, partisan, and opaque organization that ultimately undercuts the power of Congress.
Unfortunately, Menand doesn't discuss the potentially inflationary consequences of the Fed's huge liquidity program. He does, however, make a forceful case against relying on the Fed to achieve policy objectives rather than legislating them. While the Fed does have a myriad tools at its disposal for mitigating recessions, climate change, and other issues, we can't risk the creation of another Supreme Court-like institution: an all-powerful, partisan, and opaque organization that ultimately undercuts the power of Congress.
November 23, 2022
This is actually a fantastic book and it really deserves 5 stars but I can’t get away from the statist appeal in the last chapter, effectively: “the govt will solve all your problems.”
First, the good: Lev gives an incredible backdrop as to why the Fed exists, the history of its creation and the mechanics of deposits that makes up the web of the financial system. You get an in-depth look at how money is created, a comparison of the different monetary instruments & other money-like deposits in the form shadow banks.
All is good still, learned a ton and now truly understand how a repo works.
He then goes on to make the argument that Fed is being stretched thin on its mandates and become a political tool (agreed) and should get back to managing the money supply, not solve all of society’s problems (agreed again).
Where I find issue is the claim that effectively shadow banks and all forms of private money should be placed within govt oversight. In the early chapters he highlights the debates in the early years of the US around the dangers of overreaching govt control (specifically, govt controlling money production — commercial banks have the honor currently):
“Politicians will eventually fall prey to the temptation to create too much money & the country’s economy will eventually stagnate.”
Do we want a central authority determine all parts of monetary control without having a hedge against it? Speaking for myself, absolutely not. Hence, other forms of deposits & money creation should be democratized.
First, the good: Lev gives an incredible backdrop as to why the Fed exists, the history of its creation and the mechanics of deposits that makes up the web of the financial system. You get an in-depth look at how money is created, a comparison of the different monetary instruments & other money-like deposits in the form shadow banks.
All is good still, learned a ton and now truly understand how a repo works.
He then goes on to make the argument that Fed is being stretched thin on its mandates and become a political tool (agreed) and should get back to managing the money supply, not solve all of society’s problems (agreed again).
Where I find issue is the claim that effectively shadow banks and all forms of private money should be placed within govt oversight. In the early chapters he highlights the debates in the early years of the US around the dangers of overreaching govt control (specifically, govt controlling money production — commercial banks have the honor currently):
“Politicians will eventually fall prey to the temptation to create too much money & the country’s economy will eventually stagnate.”
Do we want a central authority determine all parts of monetary control without having a hedge against it? Speaking for myself, absolutely not. Hence, other forms of deposits & money creation should be democratized.
July 22, 2023
A comprehensive overview of the Federal Reserve's history in the current context. I am an accountant by trade, Finance adjacent by profession. I read and hear a lot of terms I don't fully understand: shadow banks, repos, cash equivalents, fractional reserve banking, etc. This book helped me more clearly understand the interlinking dominos between 2008, the pandemic, current interest rate environment, and the increased financialization of our economy.
A quick read as well; I love the Colombia Global Reports series.
To the reviewers who take issue with the last ten pages of suggestions from the author on how to move forward, I might posit this: a government created system can only be governed by a central government.
A quick read as well; I love the Colombia Global Reports series.
To the reviewers who take issue with the last ten pages of suggestions from the author on how to move forward, I might posit this: a government created system can only be governed by a central government.
March 15, 2023
I both loved and was frustrated by different parts of this book. On the one hand, I share many of the deep principles and objectives Lev Menand brings to the work: a primarily monetary view of banking, a strong skepticism of increasing mission creep at the federal reserve, and high concern for the growth of shadow banking, to name just a few. I also really appreciate the books’ strong historical and legal focus.
On the other hand, though, Menand sees severe moral hazard in most things central banks do and attributes inequality to the Fed at nearly every turn and argues the Fed should focus on preventing these. Many bold statements are made with what I believe is a misleading degree of confidence that likely cannot be fully supported by research (the book is unfortunately light on references to & engagement with relevant research).
On moral hazard and the growth of shadow banking, it is not at all clear that the Fed is primarily responsible. It may be, but it may also not be. An alternative explanation is the dramatic financial deregulation that has occurred since the 70s caused the growth of shadow banking. Of course both may be true in smaller or larger degree, but these are topics for debate, not self-evident facts. In general, I am skeptical moral hazard is as profoundly important and transformational as Menand asserts it is.
On inequality, Menand is very focused on the financial wealth of the wealthy, but less focused on the severe costs of unemployment & weak labor markets on low wealth individuals. For example, when describing the Debtmans and the Asseters as an example, Menand does not consider the counterfactual where unemployment is persistently high and low wealth households have to make hugely damaging decisions in weak labor markets under dire financial constraints, causing irreversible damage and scarring their income potential for life, phenomena well documented in labor economics. And while it is true that raising or lowering interest rates changes asset prices, this is mostly a one-time level change. Importantly, to the extent that financial inequality may be worse off, this can be completely reversed by fiscal policy any time after the fact since financial wealth is a matter of the state controlled monetary ledger. Simply tax it. But if the Debtmans have to take their child out of school or cannot afford critical medicines, these actual material events cannot easily be undone after the fact. For these, among many other reasons, the central banks should *not* be more focused on restraining the wealth of the wealthy than on preventing distress for low wealth households. The Fed simply has no business worrying about Bezor or Musk (fiscal policy on the other hand does). It should be squarely focused on average households and those most vulnerable to macroeconomic and financial distress. In a bit of a twist, Menand, like those he criticizes for asking the Fed to fix everything, seems to want to take a job well suited for fiscal policy and foist it onto the Fed, which is not well suited for the task.
Another confusion is that Menand seems to be concerned with monetary policy being insulated from day-to-day democratic oversight, but also wants to automatize fiscal countercyclical policy, which seems at odds with his criticism of monetary policy independence. (for the record, I think there is an important role for both monetary and fiscal countercyclical policy to be partially insulated)
Finally, Menand's view of how quantitative easing works feels particularly monetarist and driven by basic supply and demand. This is in contrast to the modern financial theories of asset pricing. It's fair to challenge those, but I think part of what made Morgan Ricks' Money Problem so powerful was that it deeply delved into banking theory, taking it apart, and putting it back together again. I think it Menand wants to write a similar opus, he should do the same for theories of quantitive easing.
Despite these points of contention, the book offers a useful perspective and clearly written, and concise view of monetary policy today, and I would strongly recommend it to anyone wanting to learn more about the current debates in monetary policy.
On the other hand, though, Menand sees severe moral hazard in most things central banks do and attributes inequality to the Fed at nearly every turn and argues the Fed should focus on preventing these. Many bold statements are made with what I believe is a misleading degree of confidence that likely cannot be fully supported by research (the book is unfortunately light on references to & engagement with relevant research).
On moral hazard and the growth of shadow banking, it is not at all clear that the Fed is primarily responsible. It may be, but it may also not be. An alternative explanation is the dramatic financial deregulation that has occurred since the 70s caused the growth of shadow banking. Of course both may be true in smaller or larger degree, but these are topics for debate, not self-evident facts. In general, I am skeptical moral hazard is as profoundly important and transformational as Menand asserts it is.
On inequality, Menand is very focused on the financial wealth of the wealthy, but less focused on the severe costs of unemployment & weak labor markets on low wealth individuals. For example, when describing the Debtmans and the Asseters as an example, Menand does not consider the counterfactual where unemployment is persistently high and low wealth households have to make hugely damaging decisions in weak labor markets under dire financial constraints, causing irreversible damage and scarring their income potential for life, phenomena well documented in labor economics. And while it is true that raising or lowering interest rates changes asset prices, this is mostly a one-time level change. Importantly, to the extent that financial inequality may be worse off, this can be completely reversed by fiscal policy any time after the fact since financial wealth is a matter of the state controlled monetary ledger. Simply tax it. But if the Debtmans have to take their child out of school or cannot afford critical medicines, these actual material events cannot easily be undone after the fact. For these, among many other reasons, the central banks should *not* be more focused on restraining the wealth of the wealthy than on preventing distress for low wealth households. The Fed simply has no business worrying about Bezor or Musk (fiscal policy on the other hand does). It should be squarely focused on average households and those most vulnerable to macroeconomic and financial distress. In a bit of a twist, Menand, like those he criticizes for asking the Fed to fix everything, seems to want to take a job well suited for fiscal policy and foist it onto the Fed, which is not well suited for the task.
Another confusion is that Menand seems to be concerned with monetary policy being insulated from day-to-day democratic oversight, but also wants to automatize fiscal countercyclical policy, which seems at odds with his criticism of monetary policy independence. (for the record, I think there is an important role for both monetary and fiscal countercyclical policy to be partially insulated)
Finally, Menand's view of how quantitative easing works feels particularly monetarist and driven by basic supply and demand. This is in contrast to the modern financial theories of asset pricing. It's fair to challenge those, but I think part of what made Morgan Ricks' Money Problem so powerful was that it deeply delved into banking theory, taking it apart, and putting it back together again. I think it Menand wants to write a similar opus, he should do the same for theories of quantitive easing.
Despite these points of contention, the book offers a useful perspective and clearly written, and concise view of monetary policy today, and I would strongly recommend it to anyone wanting to learn more about the current debates in monetary policy.
February 17, 2023
Mostly a neat, first-principles overview of how the U.S. banking system works and the evolution of the Fed since its foundation. The writing is clear and the book is comfortably short.
I read this because Menand has some interesting things to say about the Martin Fed and its role in the development of the repo and eurodollar markets. Sadly, he says them only obliquely here. Maybe worth reading a more technical book on Bretton Woods and the 1974 eurodollar crisis.
I read this because Menand has some interesting things to say about the Martin Fed and its role in the development of the repo and eurodollar markets. Sadly, he says them only obliquely here. Maybe worth reading a more technical book on Bretton Woods and the 1974 eurodollar crisis.
January 16, 2024
Very informative and current. I considered taking away a star because the book is very heady and intellectual which makes it non-digestible for a curious reader without a background in bank and non-bank financial institutions and advanced financial instruments. However, considering the author’s background and the need for a rigorous framework to evaluate our complex financial system, this book does it justice … and in just over 170 pages! Superb.
May 19, 2025
Among the many that I have read, The Fed Unbound provides the best explanation of the mechanics of the modern economy and particularly of some of its more poorly understood major components. In the context of explaining how the rise of shadow banking has completely changed the financial system that the Federal Reserve was created to regulate, Menand clearly delineates the organization's origins, function, and present challenges and the latter exceed its capabilities as things stand.
June 20, 2022
quite an accessible read. i have some quibbles but overall an interesting argument that changed how i think about the fed. i recommend it for people looking to learn more about the fed’s legal construction, its ‘08 & ‘20 crisis activity, repo, and shadow banking.
April 1, 2023
A fine short read on today's most important institution - the US Federal Reserve. Even non-finance/economics people can take a stab.
July 9, 2023
The first book I read to understand the Central Bank, evolving from Bank of England to FED until recently.
October 17, 2025
Surprisingly accessible and very interesting!
Displaying 1 - 12 of 12 reviews