Business Economics (2022) 57:140–146

https://doi.org/10.1057/s11369-022-00257-4

BOOK REVIEW

Christopher Leonard: The Lords of Easy Money: how the federal reserve
broke the American economy

Simon & Schuster, 2022

William Poole1,2

Published online: 13 June 2022

“Note that, unlike others, I worry less about the threat chapter concerns Tom Hoenig, which is where my connec-
of inflation down the road, something that will become tion comes in.
clearer later in the book … ” Mohamed A. El-Erian, I was sworn in as President of the Federal Reserve Bank
The Only Game in Town (2020, p. 25) of St. Louis in March 1998. My first FOMC meeting came
later that month. Tom Hoenig was sitting at the same FOMC
By late 2021, Mr. El-Erian may have recalibrated his
table I was. My final FOMC meeting was January 2008;
worry meter.
Hoenig was at that meeting also. I was subject to mandatory
As with many fine journalists, Christopher Leonard
retirement and left the Federal Reserve at the end of March
develops his theme by telling two stories. One is about the
2008, after being disconnected from confidential informa-
multiple dissents entered by Kansas City Federal Reserve
tion as per standard procedure once the Minutes of the Janu-
President Thomas Hoenig at meetings of the Federal Open
ary 2008 meeting were finished final editing.
Market Committee in 2010. The second story revolves
Tom and I had a cordial working relationship. Our fun-
around the travails of Rexnord, a Midwest manufacturing
damental outlooks on monetary policy were compatible. He
company repeatedly refinanced by its owners into higher
may or may not be accepting of my remarks in this review,
levels of debt.
but I know that we could have a friendly conversation about
Jerome Powell is the connection between these two sto-
the issues.
ries. President Obama appointed Mr. Powell to the Federal
Although Mr. Leonard’s stories are gripping, they do not
Reserve Board in 2012 to fill an unexpired term and reap-
correctly relay the message Hoenig intends.1 Nor was Mr.
pointed him in 2014 to a full term. He took office as Chair
Hoenig’s policy position, I believe, completely sound. The
February 5, 2018 following nomination by President Trump
best place to begin is with a story of my own.
and Senate confirmation. In late 2021, President Biden nom-
Several years ago I attended a Midwinter Rendezvous
inated him for a second term as Chair, but as of this writing
luncheon event of the Elk River Yacht Club. The speaker
in March 2022 the Senate has not confirmed the nomination
after lunch was a retired Delaware Bay pilot. He, like other
and he is serving as Chair Pro Tempore. One of my tasks
pilots who guide giant ships into harbors, was very knowl-
in this review is to explain the connection between the two
edgeable about the shifting characteristics of the Delaware
stories.
Bay and River. He told a story about boarding a huge tanker
Powell’s connection to Rexnord was this, to quote from
at the mouth of the Delaware Bay and guiding it to the dock
Wikipedia: “From 1997 to 2005, Powell was a partner at
at an oil refinery a few miles south of Philadelphia.
The Carlyle Group, where he founded and led the Industrial
A small pilot boat, docked in Lewes Delaware near
Group within the Carlyle U.S. Buyout Fund.” Leonard’s first
the entrance to Delaware Bay, took him out to the tanker.
The pilot boat cruised alongside the huge ship at the same
speed and the pilot grabbed the ladder the tanker crew had
* William Poole 1
Mr. Leonard’s book is very frustrating for a former academic to
wp007@earthlink.net
read. After 30 years as an academic and countless conferences read-
1 ing and discussing research papers, in reading Mr. Leonard’s book I
Mises Institute, Auburn, USA
was immediately confronted with an almost total void when it came
2
Merk Investments, San Francisco, USA to references documenting the facts asserted.

Vol:.(1234567890)
Christopher Leonard: The Lords of Easy Money: how the federal reserve broke the American economy 141

deployed. Climbing the ladder to the deck, the pilot was because he thought monetary policy risked a dangerous
escorted straightaway to the bridge to take command. The increase in inflation.
ship’s captain had timed the arrival so the tanker could reach “Hoenig was trying to stop something: A public policy
the dock at high tide. The ship was heavily laden and the that he believed could very well turn into a catastrophe. …
channel just barely deep enough to reach the dock at high But the wheels were already turning to make this policy a
tide. reality, and the wheels were far more powerful than he was.
The ship’s captain briefed the pilot with some very unwel- The wheels were powered by the big banks on Wall Street,
come information—the ship’s reverse gear was not function- the stock market, and the leadership of America’s Federal
ing. That was bad news. To reach the dock at high tide the Reserve Bank.” (Leonard, p. 3). I note that Mr. Leonard does
ship had to run up the Bay at top speed. A ship of this sort, not offer any evidence of the role of big banks or of the stock
perhaps 900 feet long, could stop in about two miles with market. Fed Chair Ben Bernanke was a former professor and
engines fully reversed. With no reverse gear, the ship and its not a banker.
crew were in big trouble. Some pages later we get to Mr. Leonard’s real message.
Needless to say, all of us at lunch were entranced. The “The allocative effect [that Hoenig emphasized] wasn’t
pilot explained that one choice would be to proceed and then something that people debated at the barbershop. But it
coast and drop anchor in an anchorage. The next day the ship was something that affected everyone. Hoenig was talking
could proceed slowly to the dock with the aid of tug boats. about the allocation of money, and the ways in which the
However, that was an expensive option. The crew had to be Fed shifted money from one part of the economy to another.
paid. Tankers are expensive to operate. The owners would He was pointing out that the Fed’s policies did a lot more
want it headed back to the Mideast for another load as soon than just affect overall economic growth. The Fed’s poli-
as possible. cies shifted money between the rich and the poor, and they
The captain got on the radio and found that the tanker encouraged or discouraged things like Wall Street specula-
company could engage several extra tugs to meet the ship tion that could lead to ruinous financial crashes.” (Leonard,
and bring it into dock, but with no reverse gear it would be p. 19).
a tricky operation. Heading north up the Bay at maximum My reading of FOMC transcripts yields the conclusion
speed, our speaker explained that he got the ship to the refin- that Hoenig did express concern about allocative issues,
ery area, coasted down to a speed low enough that the crew but not primarily about distributional ones. Mr. Hoenig
could get lines out to the tugs, and they brought the ship and Mr. Leonard both assumed that Fed policy was respon-
into dock safely. sible for the 2008 crisis. That is clear from two speeches
What is the relevance of this story to readers of Lords of Hoenig gave in March and June of 2011 (Honig 2011a,
Easy Money? A fundamental proposition in the economic b), and from Mr. Leonard’s book. Neither mentioned the
policy literature as it developed after World War II is that report of the Financial Crisis Inquiry Commission, offi-
the number of policy instruments must be at least as large cially released February 25, 2011. The majority Commis-
as the number of policy goals. The goal for the ship was sion report blamed the Fed’s lack of adequate regulation,
to get to the dock. The usual piloting instruments, or con- whereas Hoenig’s emphasis was on excessively expansion-
trols, were the helm connected to the rudders, by which the ary monetary policy whether measured by interest rates
ship could be turned; the engines controlled forward speed, or the increase in the monetary base. Most importantly,
another goal variable. It was important to understand the neither Mr. Hoenig nor Mr. Leonard mentioned the FCIC
limitations of the control instruments. The turning circle of minority report by Peter Wallison. Readily available to
these huge ships would be close to a mile. A ship going nor- Leonard was Wallison’s more complete analysis in his
mal speed at sea might take two miles to stop with engines 2015 book.
in full reverse. The ship did not need reverse gear in the Wallison explained that the 2008 crisis was a conse-
open ocean but it did to enter a harbor. In economist-speak, quence of HUD regulation requiring that the Government
it needed the reverse-gear instrument to achieve the goals Sponsored Enterprises, Fannie Mae and Freddie Mac, buy
when entering the harbor. weak mortgages under the affordable mortgage program
There are many reviews of Mr. Leonard’s book; not a launched by 1992 legislation. I find Wallison’s work per-
single reviewer discussed Federal Reserve policy in the con- suasive, including his FCIC dissent and his 2015 book.
text of policy goals and policy instruments. Most reviewers Wallison offers a huge amount of evidence, all of which
were concerned, as was the author Christopher Leonard, withstands extensive scrutiny. In any event, for Mr. Hoe-
with distributional issues. None of these authors, nor Federal nig to ignore the FCIC Report and Mr. Leonard to ignore
Reserve leaders since the 2008 financial crisis, have shown both that report and Wallison’s 2015 book is scholarly
much interest in the perils of inflation. Hoenig dissented malpractice.
142 W. Poole

Mr. Leonard slips uneasily between goods price inflation a formal dissent. He feared that the Fed’s expansionary pol-
and asset price inflation, as shown by the following passage. icy would yield an economy like that of 2021, with inflation
running far above target.
But the Fed wasn’t just inflating consumer prices. It
Legislation defines, though somewhat vaguely, the goals
was inflating asset prices as well. This was the form
the Fed is to achieve: Put simply, the Fed is to achieve full
of inflation that was alarming to bank examiners like
employment, price stability, and financial stability. What
Hoenig. The value of farmland, a key asset for banks
policy instruments does the Fed have to promote these
within the Kansas City Fed district, was rising steeply.
national policies? Mr. Leonard and his reviewers argue
So was the value of commercial real estate, and the
that the Fed has expanded its assets excessively. I do not
value of oil wells and drilling rigs. These assets were
disagree.
the collateral on banks’ balance sheets, and their ris-
The problem, however, has nothing to do with income-
ing value encouraged more aggressive lending. Banks
or wealth-distribution issues. The Fed does not have policy
throughout the Midwest extended big loans to farmers,
instruments—policy “tools,” as the Fed prefers to say these
based on the theory that the value of farmland would
days—that it can use to achieve desirable distributional
keep rising and support the value of the loan. The same
goals. Nor is the Federal Reserve an appropriate institution
thing happened in the oil business, and real estate.
to make decisions on distributional goals. Congress is the
Hoenig heard about short-term construction loans
appropriate institution and tax law the appropriate, and per-
that were extended based on the theory that property
haps only, effective policy instrument.2 The Fed expanded
values would rise so quickly that the loan could be refi-
its portfolio in an effort to achieve employment and stable
nanced as soon as the building was finished. This was
price goals.
pushing the banks to make riskier loans. High inflation
Consider other goals in the law. What instruments does
and relatively low rates discouraged banks and inves-
the Fed have to affect the trade balance—a goal in the The
tors from saving money, because savings earned only
Full Employment and Balanced Growth Act of 1978? Sup-
small interest payments compared to the value it lost
pose the Fed is exercising its powers appropriately to deliver
from inflation. The banks had to find something to do
stable prices and high employment. Its actions in adjusting
with their money that earned a good return. They were
interest rates may well affect the trade balance. What other
pushed out further on the yield curve. Hoenig and his
instruments are there, so to speak, “left over” to be applied
team watched this happen, but there was very little
to trade issues? Congress and the President have instruments
that they could do about it. As asset prices rose, the
that affect trade—international treaties involving trade, for
banks could credibly argue that the loans were safe and
example. I do not believe that there is a trade imbalance
the banks were stable. The examiners at the Fed could
problem, but if there is, what is the case for the Fed getting
argue otherwise, but the bankers had the numbers on
involved?
their side. In 1981, Hoenig was promoted to vice presi-
No case whatsoever is my answer, because diverting
dent of the Kansas City Fed’s supervision department,
interest-rate policy for a trade objective, or a distributional
overseeing a team of about fifty bank examiners. He
objective, will necessarily guarantee that the inflation and
got the job just in time to learn his most important
employment objectives will be compromised. The same
lesson about the role of the Fed in American econom-
holds for attempting to influence asset prices through inter-
ics. He got to see what happens when a long period of
est-rate policy. Success in contributing to achieving all goals
inflation comes to a sudden, unexpected stop.
requires at least as many policy instruments as goals.
“You have this enormous collapse,” Hoenig said.
“Failure upon failure, loss upon loss, crisis upon cri-
sis.” (Leonard, pp. 50–51).
1 A base‑line macro model
A central point to understand about this passage is that
goods price inflation was driving asset prices. Once goods Suppose the Fed is doing a good job keeping the economy
price inflation slowed, asset prices fell. The monetary policy on a good track using its policy instruments. It would be best
conundrum arises when asset prices are rising without goods to say, “instrument” singular, rather than “instruments” plu-
price inflation, as with stock prices in the 1995–2000 period. ral. I assert that the only instrument the Fed has to affect the
Here is the instruments/goals issue. Does the Fed have
enough instruments to control employment, inflation, and
2
asset prices? If not, then it will necessarily fail to achieve Tucker (2018) emphasizes the importance of distinguishing
its targets on one or more of its objectives. Hoenig was not between distributional choices and distributional effects. “Distribu-
tion” and “distributional” together appear 150 times in his book. He
quite a minority of one, as is clear from reading the 2010 provides a very careful and well-informed treatment of central bank-
FOMC meeting transcripts, but he was the only one entering ing issues.
Christopher Leonard: The Lords of Easy Money: how the federal reserve broke the American economy 143

economy as a whole—the macro or aggregate economy—is However, doing so risks creating longer-run problems as
the rate of interest. We used to talk of money growth and/or market expectations evolve to expect Federal Reserve res-
bank credit growth as instruments but Fed policy has long cues—the problem of moral hazard. Banking regulators do
focused on interest rates. Putting aside extensive debates have another instrument available—bank capital standards.
about these topics, most economists have agreed that the Fed Unfortunately, capital standards have been too low and
can pursue a successful policy using its interest-rate instru- remain too low. Evidence that capital standards were too low
ment. What about quantitative easing and the Fed’s balance in 2008 is that too many banks failed and that the standards
sheet? I’ll take up that subject shortly. have since been increased. In 2008, many market profession-
Economists widely accept the proposition that monetary als did not trust the regulatory process.4
policy—with exceptions to be discussed—does not affect There is another instrument that the Federal Govern-
real variables in the long run. The Fed cannot keep the ment could and should use. An amendment to the corporate
unemployment rate below the natural rate, or “non-accelerat- income tax code to eliminate or scale back the deductibility
ing inflation rate of unemployment” (NAIRU), as some pre- of interest would reduce the use of excessive amounts of
fer to put it. The Fed has no instruments to affect population debt by corporations. Another approach would be to per-
growth, productivity growth, immigration, the distribution mit corporations to deduct dividend payments in calculat-
of income, and other real variables. The Fed cannot affect ing corporate income subject to tax. Unfortunately, when
the number of people who are vaccinated. discussing Rexnord neither Mr. Leonard nor his reviewers
This argument concerning monetary effects on real vari- mention these options, long discussed in the public finance
ables needs to be modified to reflect the fact that inflation literature. Nor do they discuss higher bank capital require-
itself affects many real variables. Economists differ as to ments. These are changes that would make the financial
exactly how and why, but we know that inflation does affect environment more stable. Application of additional policy
real variables; therefore, Fed policy does affect real variables instruments could accomplish objectives monetary policy
via inflation. Inflation above the Fed’s target of 2% per year alone could not achieve.
may create inefficiencies. Also, inequities. So also might It is also true, unfortunately, that Federal Reserve officials
inflation below 2%; Variable inflation is a special concern have not argued vigorously for these reforms.
because it is certain to be inaccurately anticipated by eco- As the U.S. economy recovered from the 1981–1982
nomic agents—consumers and producers and government recession, starting in November 1982, the inflation rate was
officials at all levels. Variable inflation also tends to create much lower than it had been. Years of substantial growth
financial instability. followed, up to the crisis of 2008. During the Volcker-
What do we mean by “financial instability"?It is normal Greenspan years we saw Fed policy adjustments that helped
in a market economy that asset prices fluctuate and that indi- the economy to get past hiccups of various sorts. Iraq’s take-
viduals and firms sometimes realize losses on their invest- over of Kuwait triggered an upset in the oil markets and a
ments. What we must mean is something along the line of relatively mild recession in the United States starting in July
damaged market functioning. Examples would include the 1990. The Fed lowered interest rates and maintained an envi-
upset in the commercial paper market when Penn-Central ronment of price stability. Before 2008, there were several
Railroad declared bankruptcy in 1970. Same, at much larger other mild upsets. The Fed’s forecasts were not always accu-
scale, when Lehman Brothers declared bankruptcy in 2008. rate, nor its policy responses perfectly timed. Nonetheless,
When markets are functioning properly, one firm can default the analysis was good enough to bring the economy back to
on its obligations without affecting access to the market that an even keel after each hiccups and growth continued.
other firms have. The Lehman failure created fear that other This experience demonstrates that in an environment of
weakly capitalized firms holding real estate assets, and other price stability and expectations of continuing price stabil-
assets of uncertain value, would also fail. The result was a ity the Fed’s policy adjustments can contribute to a rela-
stampede into safe assets. tively stable and growing economy. Except for brief periods
Damaged market functioning is especially likely when a measured in quarters, the Fed did not affect real variables.
large bank fails, as so many did in the horrible slide from The environment of economic stability surely contributed to
1929 to the bottom of the Great Depression in March 1933. enormous advances in computer technology and adoption
When market functioning becomes disrupted, the Fed of that technology by producers and consumers. Provided
can step in to provide support in several different ways.3 inflation expectations are firmly held, the Fed can simulate
or restrain the real economy by adjusting its fed funds rate

3
“The entire financial system experienced a total collapse.” (Leon-
4
ard. p. 6). Utter nonsense. Checks continued to clear as long as the Regulators always assert that banks are safe. Not to do so would
accounts on which they were written had funds. invite an immediate run.
144 W. Poole

instrument down or up a bit. Thus, this single instrument can Then, in later years the Fed continued to expand its LSAP
be used not only to stabilize inflation and inflation expecta- program without any evidence as to why earlier efforts were
tions but also can offset, at least in part, temporary condi- unsuccessful. A physician who continued to prescribe the
tions that would otherwise push the real economy off track. same drug without understanding why earlier dosages did
Mr. Leonard and his reviewers have completely failed to not work would be guilty of medical malpractice. My review
understand that the Fed has only one instrument—the short- of FOMC materials available through 2016 does not identify
term interest rate—it can use to guide the macro economy. any convincing studies of why the program was not working.
Using that instrument for other purposes guarantees that it I did some research on the investment question in 2011.
will not be used to guide the economy appropriately. In December of that year I presented a paper at a Phila-
Where We Are Today. Mr. Leonard and his reviewers delphia Fed conference entitled, “Where is the Investment
discuss the effects of excessive Fed activism in growing Boom?” In the paper I tracked regulatory decisions of the
its portfolio. What they do not examine sufficiently is the Federal Energy Regulatory Commission (FERC) with regard
instability created by the huge growth in the Fed’s portfolio to licensing pumped storage energy projects.
over a period of years. They focus on distributional issues I summarized my findings in a 2014 opinion piece in
and ignore the really big issue—potential to create or enable Forbes Magazine. “The federal government is not ‘permit-
inflation. ting’ the economy to grow. Yes, that’s ‘permitting’ as in
The inflation that began in early 2021 will have nega- Environmental Protection Agency permits, Federal Energy
tive effects on income and wealth distribution. Inflation is Regulatory Commission (FERC) permits, Department of
punishing frugal households that invested conservatively. Transportation permits, and the list goes on and on. Federal
Inflation will reward households that borrowed on 30-year regulatory agencies are not granting permits for private firms
mortgages to buy houses they could just barely afford. They to build infrastructure, and U.S. investment and employment
will look back and wonder why they ever had a doubt about growth are hurting because of it.”
buying those expensive houses. Even though residential In 2014, Fed staff members Eugenio Pinto and Stacey
property prices are today (January 2022) almost 20% higher Tevlin wrote a memo for the FOMC, “Perspectives on the
than a year ago, market demand is still strong as families Recent Weakness in Business Investment.” They said noth-
kick themselves for not buying sooner. These observations ing about regulation, instead basing their analysis on regres-
are consistent with Mr. Hoenig’s observations about what sion studies. Their regressions picked up the vigorous recov-
happened as a consequence of the 1970s inflation. ery in business investment after the 1980–1981 recession.
The Fed’s problem, as of early 2022, is that it has lost its That was an era characterized by the Reagan administra-
reverse gear and has no tugboats to call. By the end of 2021, tion’s emphasis on reducing regulation and the investment
the 12-month inflation rate was higher than it had been for incentives in the Economic Recovery Tax Act of 1981. In
40 years. Tom Hoenig worried in 2010 because he observed contrast, the recovery after 2009 was marked by heightened
the enormous growth in the Fed’s balance sheet without any regulatory scrutiny and opposition of environmental groups
apparent concern as to how to reverse the growth when the to all investment that—as I like to put it—involved moving
time came. earth. The Keystone pipeline was victim of this mentality.
My complaint about 2010—the year of Mr. Hoenig’s Given the publicity over Keystone, my view was hardly
repeated dissents—and later years is very simple. Why did obscure. Nonetheless, as best I can tell, the Federal Reserve
the Fed continue with massive asset purchases without figur- never investigated the regulatory environment carefully.
ing out why they were not working? A memo prepared for Wasn’t my hypothesis at least viable enough to deserve
the March 2010 FOMC meeting is entitled, “Large-Scale careful consideration? Along with Tom Hoenig, I feared the
Asset Purchases by the Federal Reserve: Did They Work?”5 inflation consequences of the Fed’s asset purchases. My tim-
The authors say, “we discuss the economic mechanisms ing was far off—no question about that. That said, I wonder
through which LSAPs may be expected to stimulate the what the Fed would have found if it had done a thorough job
economy and present some empirical evidence on those investigating regulatory constraints.
effects.” In fact, they provide extensive analysis supporting The investment boom in 1983–1984, which followed the
the proposition that the asset purchases reduced long-term deep recession of 1981–1982, reflected lower inflation, the
interest rates but no analysis of whether that effect increased investment tax credit in the 1981 Economic Recovery Tax
business investment or increased real GDP in some other Act, the Reagan administration’s emphasis on less regulation
way. and the military build-up. Defense procurement is gener-
ally on a cost-plus basis and is difficult to model correctly.
Positive conditions like these were absent after 2009; that, I
believe, helps to explain the slow recovery of investment and
5
Gagnon et al. (2010). economic activity after the financial crisis. My explanation
Christopher Leonard: The Lords of Easy Money: how the federal reserve broke the American economy 145

is almost surely partial. The research is not yet in hand to and big government …” (p. 152) Why the pejorative “fixer?”
finish the story. Argument by innuendo?
At the beginning of this review I noted that one of my
tasks would be to connect the Hoenig and Rexnord stories.
2 Leonard’s perception of rexnord The outcome of my investigation is that there is no substan-
tive connection whatsoever. Leonard does not even attempt
“Financial engineering was key to Rexnord’s strategy.” to show how Powell’s work with Rexnord provides any
(Leonard, p. 187) I do not believe that statement is correct. insight into his performance as Fed Chair.
U.S. manufacturing companies survive when they are suc-
cessful in developing new technology. The high-value part
of such a business is design, engineering, marketing, and 3 Fact checking?
management. Here are a few excerpts of what the company
(at the time, Regal Beloit Corp.) says in its 2020 10-K fil- There are so many errors of fact and misleading statements
ing with the SEC, dated March 2, 2021 (Fiscal year ending in this book that the only reasonable conclusion is that there
January 2, 2021). were no fact checkers. Consider just one example, referring
to 1999: “The FOMC increased rates sharply after that, from
1. “We believe that innovation is critical to our future 5.7 to 6.5%. This was the equivalent of hitting the emergency
growth and success and are committed to investing in brakes on a subway train.” (p. 86) How would Leonard char-
new products, technologies and processes that deliver acterize policy tightening in 1994–1995 which, starting
real value to our customers. … With our emphasis on February, totaled 3 percentage points, including an increase
product development and innovation, our businesses in the federal funds rate target of 75 basis points followed
filed 21 Non-Provisional United States ("US") patents, by another of 50 basis points in February 1995? Leonard’s
6 Provisional US patents and an additional 30 Non-Pro- analysis of monetary policy is simply unreliable.6
visional foreign patents in fiscal 2020.” It is often said that it is a mistake to judge a book by its
2. “We have manufacturing, sales and service facilities cover. To that we need to add, “or by the publisher’s infor-
in the US, Mexico, China, Europe, India, Thailand, mation about the book.”
and Australia, as well as a number of other locations Simon & Schuster’s website info about the book is simply
throughout the world. Our Commercial Systems seg- incorrect. The blurb states “The New York Times bestsell-
ment currently includes 46 manufacturing, service, ing business journalist Christopher Leonard infiltrates one
office and distribution facilities of which 14 are principal of America’s most mysterious institutions—the Federal
manufacturing facilities and 3 are principal warehouse Reserve—to show how its policies spearheaded by Chair-
facilities.” man Jerome Powell over the past ten years have accelerated
3. “At the end of fiscal 2020, we employed approximately income inequality and put our country’s economic stability
23,000 full-time associates worldwide. Of those asso- at risk.” The book contains no data on income inequality nor
ciates, approximately 11,000 were located in Mexico; anything about how the Fed “accelerated” it. With respect to
approximately 3,700 in the US; approximately 3,000 in the Fed’s asset purchases, the blurb states, “Once it printed
China; approximately 2,200 in India; and approximately all that money, there was no way to withdraw it from circu-
3,100 in the rest of the world.” lation.” Simply wrong. In fact, total Federal Reserve assets
fell by 17% from early 2015 to mid 2019. Using the current
Managing facilities and 23,000 employees spread around Fed series, “Monetary base, Reserve Balances, monthly” we
the globe is no mean feat. Far more was involved than finan- observe a decline of 48% from August 2014 to September
cial engineering. Did Mr. Leonard examine any of the com- 2019.
pany’s 10-K reports? Apparently not. The publishers play up Leonard’s argument at the end of
Why did Mr. Leonard want to link the Hoenig and his final chapter about wealth inequality. “Millions of people
Rexnord stories? The common element is Jerome Powell, in the middle class were falling behind. To compensate for
who helped to manage Rexnord when Carlyle Group con- this fact they took on loads of cheap debt, which helped them
trolled the company. Other than the Powell connection, there feel like they were at least remaining in place.” (p. 296).
is no reason whatsoever to link Hoenig and Rexnord.
Mr. Leonard expands on his brief biography of Powell in
his chapter 8, “The Fixer.” … “He occupied the offices that
connect the worlds of Washington and Wall Street. He was a 6
I urge readers of Leonard’s book to follow up with Tucker (2018).
fixer who helped things operate smoothy between big capital Tucker, a former senior official of the Bank of England, has written a
deeply informed and responsible book on central banking.
146 W. Poole

It takes two to tango. Who were the lenders? Above all, El-Erian, Mohamed A. 2020. The Only Game in Town. New York:
Fannie Mae and Freddie Mac. Why did they lend so much? Random House Publishing Group.
Gagnon, Joseph, Matthew Raskin, Julie Remache, and Brian Sack.
Read Peter Wallison’s (2015) book. The reason was that 2010. Large-Scale Asset Purchases by the Federal Reserve: Did
HUD regulations under the affordable mortgage program They Work? Federal Reserve Bank of New York Staff Reports,
required that the GSEs make these loans. Where did the 441.
GSEs get all the funds? They borrowed from the market, Hoenig, Thomas. 2011a. Monetary Policy and Shifting Economic
Risks. Speech at London School of Economics (March). [https://​
which correctly assumed that the federal government would www.​bis.​org/​review/​r1103​31b.​pdf?​frames=0]
stand behind the loans. When Fan and Fred were headed Hoenig, Thomas. 2011b. “Rebalancing Toward Sustainable Growth.”
for insolvency in September 2008, the federal government Speech before The Rotary Club of Des Moines and the Greater
brought them into conservatorship. Sadly, they were con- Des Moines Partnership, Des Moines, Iowa (June). [ https://w ​ ww.​
bis.​org/​review/​r1108​03e.​pdf]
served and not liquidated. Pinto, Eugenio and Stacy Tevlin. 2014 Perspectives on the Recent
As I write, Fan and Fred are again feeding a housing Weakness in Business Investment. [https://​www.​feder​alres​erve.​
boom with house prices rising at a rate a bit below 20% per gov/​monet​arypo​licy/​files/​FOMC2​01404​18mem​o02.​pdf]
year. The subtitle to Wallison’s book is “What Really Caused Poole, William. 2011. “Where is the Investment Boom?” The Phila-
delphia Fed Policy Forum: Budgets on the Brink: Perspectives on
the World’s Worst Financial Crisis and Why It Could Hap- Debt and Monetary Policy. Unpublished.
pen Again.” May I recommend that Leonard and his other Poole, William, 2014. The Federal Government's Permitting Process
reviewers read this book? Has Hamstrung Economic Growth. Forbes, February 20.
Public Law 95-523—Oct. 27, 1978 (“Humphrey-Hawkins Act”)
[https://​fraser.​stlou​isfed.​org/​files/​docs/​histo​r ical/​congr​essio​nal/​
full-e​ mploy​ ment-b​ alanc​ ed-g​ rowth-1​ 978.p​ df?u​ tm_s​ ource=d​ irect_​
Open Access This article is licensed under a Creative Commons Attri- downl​oad]
bution 4.0 International License, which permits use, sharing, adapta- The Financial Crisis Inquiry Report. 2011. Washington: U.S. Gov-
tion, distribution and reproduction in any medium or format, as long ernment Printing Office. [http://​fcic-​static.​law.​stanf​ord.​edu/​cdn_​
as you give appropriate credit to the original author(s) and the source, media/​fcic-​repor​ts/​fcic_​final_​report_​full.​pdf]
provide a link to the Creative Commons licence, and indicate if changes The Full Employment and Balanced Growth Act of 1978. (Public Law
were made. The images or other third party material in this article are 95-523—Oct. 27, 1978).
included in the article's Creative Commons licence, unless indicated Tucker, Paul. 2018. Unelected Power: The Quest for Legitimacy in
otherwise in a credit line to the material. If material is not included in Central Banking and the Regulatory State. Princeton: Princeton
the article's Creative Commons licence and your intended use is not University Press (Kindle Edition).
permitted by statutory regulation or exceeds the permitted use, you will Wallison, Peter J. 2015. Hidden in Plain Sight: What Really Caused
need to obtain permission directly from the copyright holder. To view a the World’s Greatest Financial Crisis and Why it Could Happen
copy of this licence, visit http://​creat​iveco​mmons.​org/​licen​ses/​by/4.​0/. Again. New York: Encounter Books.

Publisher's Note Springer Nature remains neutral with regard to

Economic Recovery Tax Act of 1981.https://​www.​congr​ess.​gov/​bill/​