A Central Bank With No Center? A Lesson From the Falcon and the Falconer

A central bank without a central role in the American banking and financial sector? Crazy, right? Absurd, you say? Not so fast—it could easily happen.

The U.S. Senate is proposing just such a plan. If the Senate proposal for financial reform is enacted without changes, one key feature will be that the central bank of the United States, otherwise known as the Federal Reserve, will be stripped of its supervisory authority over all financial institutions of less than $50 billion.

What? Can it be that our policymakers would blind our central bank to the thousands of financial institutions on Main Street America? Are we to have a central bank with no “center”? Will the central bank become misshapen by its sole focus on Wall Street? Can the central bank’s “center” hold or will it fall apart like the center in William Butler Yeats’ famous poem “The Second Coming,”

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;

Mere anarchy is loosed upon the world,

The Federal Reserve is our financial system’s falconer, and the district banks, collectively, are the falcon—ever watchful, circling the regions of this nation. If the Federal Reserve is truncated in its mission and the district banks lose their ability to look into nearly 8,000 Main Streets across America, can the financial center truly hold? Or will “things fall apart” and, with apologies to Mr. Yeats, mere financial anarchy be loosed upon the United States as the falcon circles further and further from the center, unable to hear the falconer? And as the pull from Wall Street distorts the center, the falconer will no longer hear the falcon, and what is a unique financial balance between Main Street and Wall Street will be lost.

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