Peter Conti-Brown on the Fed under Trump 2.0, Reforming the Discount Window, and Providential Moments

Peter Conti-Brown is a historian and legal scholar of the Federal Reserve System and an associate professor at the Wharton School of Business at the University of Pennsylvania. Peter returns to the podcast to discuss the state of Federal Reserve leadership under the incoming Trump administration, expectations for Fed independence, a new proposal for limiting stigma at the discount window, stories about a life lead by faith, and much more.  

Check out our new AI chatbot: the Macro Musebot!

Read the full episode transcript:

This episode was recorded on January 10th, 2025

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected].

David Beckworth: Welcome to Macro Musings, where each week we pull back the curtain and take a closer look at the most important macroeconomic issues of the past, present, and future. I am your host, David Beckwith, a senior research fellow with the Mercatus Center at George Mason University, and I’m glad you decided to join us.

Our guest today is Peter Conti-Brown. Peter is a historian and legal scholar of the Federal Reserve System, an associate professor at the Wharton School of Business at the University of Pennsylvania, and a longtime friend of the podcast. Peter joins us again today to take stock of where the Fed has been over the past few years and where it is likely to go under the Trump administration. Peter, welcome back to the program.

Peter Conti-Brown: Such a delight to be here, David. Thanks for having me.

Beckworth: It’s great to have you on. We were just chatting before you came on that you were on the podcast back in 2016. If I do my math correctly, that means we are starting year number 10, which blows my mind that I’ve been doing it for going on 10 years. Thank you, Peter, because you were there to help jumpstart this endeavor, and here you are at the other end of it, help keeping it going.

Conti-Brown: I’m glad to be part of the first generation of Macro Musings. It’s my favorite podcast. I never miss a week.

Reaching Audiences Through Various Forms of Media

Beckworth: Thank you so much, Peter. Times are changing, and as times change, so do we and the mediums that we use to reach our audiences. We’ve been making changes here on the podcast. For example, we post video clips. We have an AI chatbot. We have a Discord. You yourself have been taking on some new changes in your life in terms of the mediums through which you reach your audience. I noticed you have gone from Twitter to Bluesky, and you have started your own Substack. Let’s talk about your transition to Bluesky. How has that been?

Conti-Brown: It’s interesting. It’s more a transition away from what we used to call in the early 2010s microblogging, these short little bursts. Twitter had been, for me, a dying enterprise until the regional banking crisis of 2023 resurrected it for me. I connected with a lot of different people who were saying really smart things, and I was learning a lot from them. I was also able to connect with people with my views there.

Then after that dust had settled in probably early to mid-2024, I just started finding that it was just choking on the kinds of content that was very hard for me to curate away from. As the year wound down, I would find myself trying to connect or follow people, certainly people like you and others who were always saying useful things. That was becoming more and more difficult for me to do.

Eventually, I just decided, “I’m going to try something else here.” I transitioned away from Twitter. I won’t say that Bluesky has really been that for me yet. There have been times when I’ve seen—and again, I’ve really tried to work to curate that content—where I can catch glimpses of what I would regard as Twitter in its golden era. For me, that microblogging is just not as effective as it used to be. Now, compare that to Substack, which has been for me an experiment just over the last few months, and that has been much more successful.

Beckworth: I love your Substack because you integrate not only topics like central banking, financial regulation, but you also bring in your personal life. You bring in your other hobbies, your music, your powerlifting, your Ironman triathlon training. Peter, you do it all. Then also your faith. In fact, later, I want to touch on some of these topics near the end of the program, beyond just central banking and financial policy discussions. It’s been great to see this side of you. I imagine it took some courage to reveal all to people out there who know you for being a legal and financial historian of the Federal Reserve System.

Conti-Brown: Yes. The idea there was funny. At Wharton, I’m a professor of financial regulation, but I teach business ethics to MBA students. It’s a required course, which has almost nothing to do with central banking and financial regulation. Over the 10 years I’ve been teaching that course to these extraordinary students, it’s an exercise in intellectually rigorous and fearless exploration.

It started with this idea: I want to integrate those two sides. My pedagogical life, teaching business ethics to MBA students, and my main professional life, my research life, which is in central banking and financial regulation. In business ethics, really, your topic is the world, all of it. You’re trying to think through all the ways, the complexities of life, the different demands that you feel for your responsibility to yourself, your community, to your business, to society.

I found as I launched this Substack to try to write about all the things that I was thinking about and experiencing that required me to be a little bit more transparent about how I view the world. I have posts about things from my intellectual crush on Ludwig Wittgenstein and also my Mormonism, my faith, Christianity, hunting, which I’d taken up in 2024, and a variety of other things too. I’ve got to say, this more than really anything I’ve ever done in public, has allowed me to connect with people in a way that feels extremely satisfying and really helps me facilitate many of my professional goals.

Beckworth: Yes, I’ve really appreciated it. If we’re honest with ourselves, everyone is making their decisions, their views about things even like financial policy, monetary policy from some ethical foundation, some moral code in their lives. When we can see behind the curtain what’s really driving our thinking, I think that really informs and adds to a richer perspective on matters.

We’ll come back to that in a bit, but you’ve been doing a lot of work this year. In fact, you had a post at your Substack and your Substack is called PCB Central. You also have been doing work, Peter, on books. You have two books coming out this year and we’ll have to have you back on when they come out. You’ve got one on the history of US bank regulation. The title is Private Finance, Public Power: A History of Bank Supervision in America. This is with Sean Vanatta. Now I understand this is a project that’s been going on many, many years.

Conti-Brown: That’s right. This is the only one that’s coming out this year. The other book we’ll talk about is still in progress. This history of bank supervision has been, with Sean, just a labor of love over the past about 10 years we’ve been working on this for all kinds of reasons. We’ve had kids born and tenure achieved. We started as graduate students together in the Princeton history department. It’s coming out in just a couple of months and I’m so proud of it.

Bank supervision is an incredibly powerful and robust set of practices and institutions. It’s the primary mechanism through which financial risk is managed in the United States. It’s shrouded in secrecy, legally and culturally. That secrecy is one of the main reasons this project took as long as it did, because to get the stories, to get this history, required just a really Herculean set of tasks and puzzles. We’ve finished it. We’ve produced it and I’m really excited for it to find its audiences and to see the conversations that it’ll help prompt.

Beckworth: The other book that you’re still working on is The Federal Reserve and American History. Maybe quickly talk about that as well.

Conti-Brown: Yes. That book is just so much fun for me to work on. My ambition here—this is going to be published by a trade press rather than an academic press like all of my other books—I’m really trying to reach people who are curious about the Federal Reserve and about its place in American society and politics. That’s really the emphasis. It’s different from Allan Meltzer’s three-volume history, which is really for specialists and want to understand the inner workings of the Federal Reserve, its intellectual history, the theories of monetary policy that have evolved from the real bills doctrine through monetarism and beyond.

I spend very little time on those kinds of questions. Those have been well researched, including recent books by Ben Bernanke and Bob Hetzel, among others. What I’m doing is trying to tell the history of the way the Federal Reserve has moved through American society and politics and navigated some of the most important, some of the thorniest political issues of the last hundred-plus years.

The subtitle is really important here, on American history. I’m talking about the ways that we in the United States and through the United States in the 20th century through the wider world have debated these core questions of American identity and power about what is money and who gets to decide, what are the implications for inflation that is high or low, the ways that the Federal Reserve has moved through its regulatory and supervisory responsibilities, and the way that the Fed has practiced the arts and sciences of politics itself, the way the central bankers have performed politically. There I’m not trying to call names of central bankers who insist that they’re just doing technocratic work.

The title of the introduction is, “Pay More Attention to the Man Behind the Curtain.” The idea there is that the central bankers at the Federal Reserve are doing a very important job, and it’s important to understand what that job is, and it’s important to understand that job is not merely technical. There are a lot of value judgments, there’s a lot of negotiation, there’s a lot of institutional politics that these central bankers navigate. I know we’re going to talk about some of that today, because we’re seeing the central bank practicing the art and science of politics in 2025 at really the top of its game. The book is about that history, but intended for a wider general audience.

Beckworth: Folks can find you on Bluesky, on PCB Central, your Substack, and your soon-to-be-released books. We’ll come back to the book you’ll release later this year on bank regulation. You just provided a nice segue into what’s happening currently with the Federal Reserve. We’ll talk afterward about specific individuals, Jay Powell, Michael Barr, since you’ve written about them in your Substack. Let’s take stock of where the Federal Reserve has been under the Biden administration. Talk about a momentous time navigating those choppy waters.

Federal Reserve Under Trump 2.0 

I think it was important that Jay Powell was the Fed chair during those times. You speak to this in your Substack piece, but you needed someone like him to navigate such a turbulent period and maintain this image of the Feds doing something technocratic, even if it’s very political. Just having the political chops, I think, is really Powell’s credit. His term ends in 2026.

Also, we just learned recently, and you’ve written about this as well, Michael Barr resigned his vice chair role for supervision. Of course, his term goes through 2032. Governor Adriana Kugler, her term ends in 2026. Since she’s a Biden appointee, it seems unlikely, at least on the surface, that Trump would reappoint her. The other governors, their terms all go through 2030s: Michelle Bowman, 2032, Lisa Cook, 2038, Chris Waller, 2030. I believe Philip Jefferson also is in the 2030s.

There are openings, but not a lot of them. Even how would Trump put someone at the vice chair role given what Michael Barr was doing? Michael Barr said he’s going to stick around. I want to throw that up for you. Also, just where do the Fed overall going? Part of this history of the Fed, is it going to be vastly different, do you think, under the Trump administration? Is he going to put his thumb on the FOMC scale, “Do it my way, guys”? Will it be just some tussles and some rhetoric and business as usual?

Conti-Brown: I think that it will be President-elect Trump’s business as usual, which means highly confrontational, highly melodramatic. This is not the melodrama that the Federal Reserve prefers. It’s well equipped to navigate, I think, those kinds of challenges. Let’s talk first from the governance perspective. Part of the genius, I think, of Michael Barr’s split decision, his decision to resign effective next month his leadership role as vice chair for supervision, but to retain his governorship indefinitely, which he can keep for many years to come, is that it limits the people whom President-elect Trump can consider to become vice chair for supervision.

Now that position, vice chair for supervision, is extraordinarily important. It matters because, by tradition, informally, the vice chair for supervision is a leader of financial policy for the entire administration. In some respects, I would say, certainly for banking, it’s more important even than the secretary of the Treasury. Treasury secretary is a hugely influential role to determine economic policy. The technical issues of banking policy, that’s going to fall to the banking agencies. Vice chair for supervision has a leadership role among those.

Because of Vice Chair Barr’s split decision, there are only two people, really, who are in the running to be named by the new Trump administration. That’s Michelle Bowman and Christopher Waller, the two current Republican governors. What’s so good about that, I think, from the Fed’s perspective, is that while no one would mistake either Governor Waller or Governor Bowman for Democrats, they are Republicans—they come from a Republican tradition of both monetary policy and banking policy—they are well within the mainstream of what we think of central bankers, just as Michael Barr was and is. That means that for the Federal Reserve to have that continuity, we have it.

Now that’s to take contrast to people like Elon Musk, who put out a poll on his Twitter profile about whether we should even end the Fed or others who have strong views but not a lot of expertise about central banking. Those people are not under consideration, can’t be under consideration for this leadership position, because by statute it has to be a governor, and there are, as you said, no vacancies at present.

President-elect Trump’s ability to influence the Fed on this first significant decision is significantly limited, and limited by Michael Barr, because he is not resigning his governorship, not creating a vacancy there. I think in that sense we’re going to see some continuity. Now these next 12 months or so, as Chair Powell navigates the end of his tenure, are going to be extraordinarily important to watch. I don’t know the future, I don’t know what’s going to come, but I feel very confident in predicting that there will be skirmishes between President Trump, the Trump administration, and the Federal Reserve.

In the Fed’s history, I don’t think there is anyone who is better equipped than Jay Powell to navigate those skirmishes. He has an extraordinary amount of credibility on Capitol Hill. I saw a public comment from Elizabeth Warren to the incoming Trump administration defending Powell and Fed independence. For those who have watched this story carefully, that was astonishing, that is jaw-dropping. Senator Warren is no fan of Jay Powell, did not support his reappointment by President Biden.

That just goes to show you that Powell enjoys a lot of support, not just on the left, but also among Republicans, primarily even, I would say, among centrists in both Democratic and Republican circles. I think in political fights where the Federal Reserve is playing a starring role, I don’t ever think of the Fed as the underdog. I think of the Fed as having a profound ability to navigate these political terrains with great success, and I would count on that, too, in the Trump administration.

Beckworth: Powell is someone who is in a great position to defend the Federal Reserve as an institution. He’s built up his capital, as you mentioned, political capital. Maybe on his way out, he uses it all up. If he’s going to go down, he goes down swinging and fights the good fight. Let me take that and apply it to a slightly different situation. This is his last year. He has a few weeks, I guess, in 2026, but this is effectively his last full year.

During this year, the Federal Reserve is doing something near and dear to my heart. I know, Peter, you probably get sick of me talking about this on the podcast, but he’s doing a framework review, right? I’m not here to discuss where they end up, because everyone knows where I want them to end up. Let’s just ask this question: Is this something that’s really going to be an endeavor where he puts his heart into it? He has one year left. Does he care? Does he really want to like, “Let’s do the best we can do, guys”? Is he going to use that energy on defending the Fed or some other project?

Conti-Brown: Oh, I love the question. I love the invitation to peer into the psychology of Jay Powell, a person I don’t know well. I’ve met him at a conference, but I’m going to accept that invitation, even though I’m not qualified to do so.

Beckworth: Okay, go for it.

Conti-Brown: Here’s the way that I see. Here’s my theory of Jerome Powell, Fed chair. He’s almost the polar opposite of Donald Trump. One of the books that came out of the first Trump administration described Trump’s attitude toward deficits as extraordinarily short-termist in orientation. When people say, “Well, you can’t do this or you can’t do that because the consequences will be so grave to the country,” Trump was quoted as saying, “Oh, but I’ll be long gone by then.”

That, in some sense, for economists, economics theorists, going back to, Kydland and Prescott and many others, that’s how we think about politicians, to be extraordinarily short-term in orientation. I do not think of Jay Powell as a short-termist in his constitution, in his ideology, in his intellectual framing. While I think that he is going to have his fingers on the pulse of the political situation better than just about anybody, he’s playing a long game, and he’s thinking about the institutional consequences for different discussions around framework review.

I would guess that this is not going to be a victory lap year for Chair Powell. My hunch is that he’s going to take this framework review extraordinarily seriously and be thinking about the ways that we should conceive of monetary policy obligations and the like with his full energy. I would imagine he is going to be running this race with eyes on the political context in the short term, but wanting to leave a legacy that lasts far beyond his own resignation.

Beckworth: That’s great to hear. I hope that the next Fed chair who steps in picks up that baton and finishes the race, because you’ve got to get buy-in from whoever takes over next. I think your broader point, though, is most of these governors will still be on the board, no matter who becomes chair. They’re going to carry forward whatever they determine at the framework review, plus all the presidents, they also have buy-in. It’s not going to be easy to turn their ship, even if you were to get a radical new chair who wanted to go in a different direction.

Conti-Brown: Yes. The buy-in, I think, is going to be really important. I think that’s why the most important question to watch is not going to be the vice chair for supervision, which, again, the suspense is sort of out of the decision, because it’s limited to two great candidates. It’s going to be who succeeds Jay Powell. I don’t know. I know what I’ve read in the press reports, which you have read as well, and there are people who are fairly attuned to Trumpian politics, who are also attuned to the institutional realities of the Federal Reserve.

My hope is that whomever it is that President Trump selects is going to be somebody who has that dual citizenship. I think that’s going to be important. The number of people who have that is very few. We could even name them now, and we would exhaust that list pretty quickly. I think that that’s the person that we want to be looking for. Anyone who is a 2020 election denier, someone who wants to come with a wrecking ball, who really gets excited about grand narratives with minimal evidence, that’s just about the worst person you would want as a central banker.

The reason is because central bankers, as technical as the work is, are just navigating a world of profound uncertainty. It’s something that Chair Powell has done very well. His speeches on navigating by the stars, I think, reveal exactly that orientation. It’s the people with the false sense of certainty and an ideological framing that makes monetary policy an expression of partisan warfare. Those are the kinds of people that we want to stay as far away from central banking institutions and levers of power as possible.

Beckworth: I will note that there is a Senate election that could complicate matters, but it looks like now the Republicans are going to continue to control the Senate because there’s really only, as I understand it, three seats that are contestable and the Democrats need four and some of those might actually flip to Republicans. I think any hopes that Democrats might have for controlling the Senate are not going to happen. Trump will get who he wants through the Senate, it’s just a question of who will it be.

Jerome Powell 

Let’s go to Jay Powell a little bit more. We’ve touched on him, but in your Substack, you have an article titled, “Jay Powell: The Political Central Banker We Need.” I loved this line from your essay, Peter, you go, “He toiled as a C-list celebrity” for a while. Now we don’t think that at all, in fact, given his notoriety, his fame, he said that he can’t eat out at a restaurant now because people recognize. He cannot go just have a meal in peace because someone will go up to him. Tell us about that journey.

Conti-Brown: Yes. He’s the accidental central banker to be sure. History is full of these kinds of contingencies. When you look at the predecessors to Jay Powell, you see people who look like they came from central casting for central banking. Janet Yellen served three previous rounds on the FOMC as a governor, as a reserve bank president, and as the vice chair. Ben Bernanke, this great scholar of monetary policy and central banking, was also chair of the CEA under Bush. Alan Greenspan, the close confidant of Republican presidents who had been groomed for the role. Paul Volcker. All of these people were prepared, not because it was guaranteed, it wasn’t guaranteed for anybody, but part of a very small conversation.

I would wager that if you went back to 2010 and said, “Name 50 people you think likely to become Fed chair in the next 10 years,” Jay Powell would not have been on that list of 50. He came about as part of a compromise. This is in the era before the filibuster had been abolished for these appointments. A compromise, so he was the Republican amenable to Democrats, paired with Jeremy Stein, the Democrat amenable to Republicans.

He spent his early years on the Fed—this is when I met him, the only time I met him at a conference. He was at a conference talking about his work chairing a faster payments task force. Now, I’m a payments scholar myself, and I think this is hugely interesting and important. I’ve got some projects ongoing about payments in various ways, but it is not a top priority for the Federal Reserve. Monetary policy first, supervision regulation second, and then payments I think of as a distant third. That was Powell’s priority. He came in as the successor to Janet Yellen in a really intriguing way. In that sense, he was that C-list celebrity. I’m going to guess he was stopped approximately zero times at restaurants before 2017.

I think he’s done a really marvelous job as a Fed chair in a variety of ways. I’ve criticized him in some of the things we can talk about as well, if you would like. He’s been an exceptional central banker, but something that he understood from the beginning, before his starring turn during the COVID-19 pandemic where the Federal Reserve played such a remarkable role, before the inflationary pulse of 2021–22 and the disinflation that followed, he understood just how politically sensitive this role is. He hadn’t drunk completely that Kool-Aid that says, “Central bankers are like scientists and engineers, and they should not traffic in politics.”

Because he pursued a different path, he built political relationships that have served the Fed incredibly well, as he’s had to make some very hard calls in the face of a lot of very public antipathy from the first Trump administration, and from what has been reported and from what I gather has been some private antipathy from the Biden administration when the Powell Fed had to pursue an aggressive policy of interest rate hikes that the Biden administration did not like and did not think was warranted, and wanted to pursue anti-inflationary measures that didn’t have to do with such high interest rates. He did it all, and I think that his legacy is almost done as he’s pursuing this last year. There’s a lot for him left to do, as we’ve already said, but his performance has been quite exceptional.

Beckworth: Yes, and we’ll provide a link to this article in the transcript. Again, the title is “Jay Powell: The Political Central Banker We Need.” You do go into mention there some of your critiques. We won’t spend time here, but with respect to governance and supervision. 

Michael Barr

Let’s move on to some other articles you’ve written. These are very interesting because they are on Michael Barr, vice chair, former vice chair for supervision. You got three of them. I’ll just briefly mention their titles: “The Complicated Options for the Fed’s Michael Barr”; second one was “Michael Barr’s Vision and Integrity”; and third, “The Partisan and Institutional Politics of Michael Barr.” Tell us about Michael Barr, this saga he’s put through, and now where he’s going.

Conti-Brown: Michael Barr, he was a former assistant Treasury secretary in the Obama administration and adviser to Clinton’s Treasury. He’d been around the block for Democratic politics and financial policy, played a critical role as a quarterback in the passage of Dodd–Frank. He wasn’t Biden’s first pick for this significant role, the vice chair for supervision. That was Sarah Bloom Raskin, but she withdrew facing a lot of opposition from the Senate, and the Biden administration didn’t move on this appointment for a long time. That already created a gap between the beginning of the Biden administration and Barr’s eventual appointment in the summer of 2022.

Barr comes in, he’s a very credible candidate, mainstream of Democratic politics, absolutely an expert on the subject matter. Within a few months, of course, we have the regional banking crisis of 2023. That absorbs a lot of the Fed’s attention. I think that Barr—and I’ve been on the record, I wrote an essay about this at the time in The American Prospect—Barr and Powell then did something I think is an incredible error, which was in March of 2023, they preannounced a timeframe for publishing a postmortem on what happened in the regional banking crisis.

I think the reason that’s an error is because it creates incredible pressure for a motivated account for what it was that occurred. The Barr report, as it has been called, that came out was not what it could have been. Regardless, this occupied a huge amount of his time. Then he immediately flipped into what was to be his main regulatory focus, which was Basel III endgame, which failed spectacularly, facing just incredible political opposition from the banking lobby and others for his proposal to dramatically increase capital requirements as part of the implementation of Basel III.

Then the election occurs in 2024, and the Trump transition starts saying that they’re going to demote Michael Barr. It’s not obvious that that’s even legal. Initially he said, and Jay Powell said, “That’s not legal, we’ll fight it. We’ll fight it in the courts.” Then this week, as we’re recording, and it’s in the first week of January of 2025, Barr does a 180 and announces his resignation from leadership. He’s not going to fight this case in the courts.

Doing so preserves the legal status of the Fed’s leadership, including the Fed chair, from summary dismissal by the president. That’s the key insight, that Barr’s half-resignation means that the question of whether the president can fire the Fed’s leadership is left open. That’s the vision and integrity that I see in Michael Barr, is that he chose the Fed’s institutional longevity ahead of his personal satisfaction. I think that’s a very hard thing to do, and I commend him tremendously for that.

Beckworth: I like in your paper how you respond to some of the progressives who just lost their cool. They were beside themselves. “How dare he resign?” Again, you make this case, he did it to preserve the Fed’s independence, also to avoid an ugly mess. Then as you said, this question might get answered in a way they don’t want answered. Let’s park there for a minute. Had this been contested, are there legal precedents would the Supreme Court have used to dismiss him?

We had some cases, I think they’re different, but just I’ll throw them out there. The CFPB and the FHFA directors, I believe they were cases that they could be dismissed. They’re a little bit different because they’re single directors versus a board of governors. Help me out here, you’re a legal scholar at the Federal Reserve. Could the Supreme Court come up with a reasonable case that would have been in favor of the president over the vice chair?

Conti-Brown: Oh, sure. The case here, it goes back a long way, a lot of arguments about exactly what it means to have a branch of government that isn’t quite executive because the president doesn’t control it. It’s not quite congressional because these aren’t elected representatives in Congress. Certainly, it’s not judicial in the sense that these regulators are not judges.

In the 1930s, the Supreme Court, in creating the modern legal context that preserves some independence, called them quasi-legislative, quasi-judicial, quasi-executive. It’s a little bit separate. This has led many people to claim that these so-called independent agencies, including the Federal Reserve, became something like a fourth branch of government that the Constitution did not name as such, but that has legal protections that describe it that way.

There are many people on the Supreme Court today, Brett Kavanaugh, Neil Gorsuch, primarily, but also the Chief Justice John Roberts, and the other conservatives, Justices Alito and Thomas, who are extremely skeptical of Congress’ ability to insulate agencies from presidential control. And add to that, that the statute, the Federal Reserve Act, is itself ambiguous about whether indeed the Congress intended to insulate these leadership positions from presidential control. There’s nothing in the statute that says the vice chair for supervision cannot be fired until his four-year term is up.

What it does say is that there is a term of four years. Some scholars have said that that four-year term implies protection from summary dismissal. Again, it’s not clear about that. The Supreme Court, which has the 6-3 conservative majority, and here I mean conservative in the sense of skepticism about agency independence, in a line of decisions, not only those that you mentioned, the so-called Collins decisions and Selia laws about CFPB and FHFA, but also other decisions like Loper Bright that eliminated deference to agencies and their interpretation of the law, all point in a trajectory toward skepticism of exactly the legal position that Michael Barr was in. That doesn’t mean that they would have ruled against Barr.

I don’t know what they would have done. My own view, as a lawyer, is that he had a very good legal argument to make, but I don’t think he would have carried the day in today’s Supreme Court. Much more to the point is this litigation would have absorbed so much of our public attention on the Federal Reserve, we literally would have been in a situation where the president and the Federal Reserve were duking it out in court.

That is not a situation that lends itself well toward preserving the Fed’s ability to play a nonpartisan role in our politics, economy, and society. To be fair to the people like Better Markets, that’s the critique that I was criticizing in my post about Barr, they want a Federal Reserve that looks more like the SEC. They want it to be where the D’s and the R’s put on their separate jerseys and they duke it out. 

The sense of playing a nonpartisan or a bipartisan game toward a long-term set of goals that’s pro-social for everybody, whatever your jersey, they don’t buy it. In that sense, they have a lot in common with the conservatives on the court, that want to say, “This should be a consequence of presidential control.” My argument to them is careful what you wish for. If you pick up one end of the stick, you’re picking up the other end.

What Michael Barr did is preserve the ability for a Democratic and a Republican vision to filter through in discussions about regulation and supervision without courting the disastrous legal and political confrontation that Barr’s litigation would have done.

Beckworth: Not only would that fight have been ugly and protracted, but I think Trump is in the place to win that argument, publicly at least. That’s his game. He could come out with tweets, with comments. The Fed’s much more professional. They’re guarded in what they say. That’d be a losing proposition from the get-go. Kudos to him for taking the bow and doing it for the team.

Now you mentioned he’s probably going to be remembered for the March 2023 banking turmoil. He’s going to be remembered for the failed attempt at Basel III. I want to go to another area where I will remember him in a more favorable light. This is his push, not only him, but a broader push toward more aggressive use or more maybe smart use of the discount window.

New Discount Window Proposal

I know you’ve also written on this, and I’ll come to you in a minute, but I’ve had other people on the show, that are friends of the show, Bill Nelson, Steven Kelly, they both have suggested ways to make the discount window used with less stigma. Steve has suggested maybe the way we report the data, we aggregate it up. Bill Nelson has tried to suggest maybe we make something like the term auction facility more regular. We have collateralized lines of credit, so the banks have lines of credit, something so that the stigma would go away. It’d be standard operating procedure.

You yourself have proposed something in an article you’ve published this year titled, “Credit Markets and the Visible Hand: The Discount Window and the Macroeconomy.” Share with our listeners what your proposal would do and why it would also help make the discount window something seen with less stigma and as part of regular business operations for banks.

Conti-Brown: Absolutely. I’m such a big fan of Bill Nelson and Steven Kelly, both for their contributions here and personally. I’m completely persuaded by their analysis of the problems that we see. In this piece with my co-author, David Skeel, we talk about a very specific implementation of what would be a very different approach to the discount window, and that would be for debtor-in-possession financing.

When a very large company goes bankrupt, its lenders and even some hedge funds and others, line up to provide it with financing to keep it going during the process of reorganization. That so-called dip financing is its lifeline to be able to have a firm that is a going concern on the other side of its reorganization. For small and medium-sized enterprises, there’s no such financing available. We see a huge amount, and there’s a reason why most small and medium-sized enterprises, when they do enter bankruptcy, it’s for liquidation under Chapter 7, not reorganization.

There are a lot of reasons for this. There’s complexity in that academic literature to account for it. A significant contributor to those liquidations is the fact that there’s no lifeline. There’s no financing available to them so they can sort through that reorganization. Part of it is that their lending relationships just don’t specialize in this. What David and I propose is using a different discount window facility. There’s nothing in the Federal Reserve Act that forbids the Fed from experimenting with different facilities.

It uses mostly the primary discount window, the secondary discount window, the seasonal discount window and then, again, the term auction facility. It could create others, and we think it should create a new one for dip financing. The idea here is that we get the Fed saying, “Hey, banks, if you’ve got a customer that’s gone bankrupt, and you see, based on your own underwriting, your own risk assessments, a firm with a going concern value through reorganization, then lend to them in bankruptcy, and we’ll support you with this discount window facility.”

That would just inject a lot more liquidity into that process and bring it a little bit more even keel so that we’re not just saying we have the ability to enter into reorganization only for the very largest firms. The genius of the bankruptcy code is the very idea that we can solve a collective action problem among creditors by allowing these firms to live to fight another day after some modification. Small and medium enterprises largely don’t have that. We think the Fed could play a role for doing that.

Michael Barr is absolutely to be credited, and Michelle Bowman has made similar arguments, Michael Hsu at the Comptroller and others at the FDIC. Everybody is on board, it seems to me. There are very few people who say, “Oh, you know what? No, discount window, that’s a free subsidy. We should get rid of that.” I’ve not seen that argument made very much. Solving the problem is another thing entirely. We’re not there yet.

Beckworth: I like your proposal because you really are addressing, I think, a market problem. Some might say, “Oh, here’s Peter with another government intervention,” but I’d say, “No, not so fast.” Because one, this is about banks in the marketplace stepping in and helping a business that could reorganize and has ongoing value, number one.

Number two, it sounds like you’re addressing a missing market. That’s the role of government. When there’s a market that should be there that’s not existing, it’s there for the big corporations, it’s not there for the little ones. You’re like, “Let’s step in. It’d be great if there were a market there provided by a private firm, but it’s not. Let the feds step in and fill that hole.”

Conti-Brown: That’s exactly right. The real contrast that we’re drawing here in a debtor-in-possession discount window facility would be to a nationalized institution that does that intermediation directly. We’re trying to say, “You know what, there’s a lot to be said for private sector intermediation. There’s a lot to be said for using the central bank as a mechanism, even if not for credit policy per se, but supporting the private sector in going in directions that it just needs a little bit more experience before it feels confident in doing without that liquidity.” Here, experience and liquidity travel hand in hand.

If you have a bank that feels that they’ve got their downside risk taken care of with liquidity through the discount window, then we’re going to see something a lot better. A good example of that, of course, is the facility opened during the pandemic to support exactly these kinds of payroll protection programs, the PPP coming out of the CARES Act, with a facility from the Federal Reserve that small banks could participate in. We see something like that, but very importantly, not through 13-3, but through the work-a-day process of general central banking, which is in the discount window.

Faith Life

Beckworth: Yes. I want to segue now into some of your other posts on your Substack. As I mentioned earlier, Peter, you touch on a lot of different topics, both monetary policy, financial policy, but also some personal ones. You mentioned you’re going to do an Ironman triathlon. You mentioned you’re a powerlifter, so watch out, Chris Waller. You’ve got a contender in this monetary policy space when it comes to powerlifting. We need to have a showdown between the two of you, who can powerlift, and see what happens.

Conti-Brown: I’ll tell you, my numbers are very, very big, and I’m proud of them, so Governor Waller, your gym or mine?

Beckworth: Maybe he gets an age-adjusted way to compete. You have all these interests that you do, but you also speak to your faith a lot. I’ll disclose here that Peter and I have often talked about our religious faith and our Christianity offline. Peter’s been a friend on that front. I want to motivate some articles that you have by listing a couple of other articles that really, I think, resonated with me by someone who’s a very popular writer at The Atlantic, and that’s Derek Thompson.

In 2019, he had an article called, “Workism Is Making Americans Miserable.” What he speaks to is that for college-educated elites, work for them has morphed into a religious identity, promising transcendence and community, but failing to deliver. The big takeaway, at least for me, is that people who maybe don’t have a religious connection, they’re searching for some connection, identity, meaning in the world. They want to know their lives matter. For many of them, that becomes their work. They’re doing something. It’s pivotal. They think they’re making a difference.

For others, it might be getting involved in politics. In fact, I would dare say, for a lot of people, politics is their identity, or social justice, or I have people in my life who are about sports. They get worked up about the NFL season, March Madness here. That drives their identity. Maybe even as family, Peter. We both have families, and we love them, and we’re caught up in them, but all these things I’ve mentioned could be taken away in an instant. You could lose your job. What happens to your identity then? Your meaning in life? You could lose your cause. You lose your family.

I think both of us, we value many of those things. We value our work, our families, we value extracurriculars, but I think we would say, fundamentally, we find our identity in our religious faith. It’s the anchor for everything else. I just want to bring that up, but workism, as documented by Derek Thompson, is something that’s a manifestation of the search for something greater to hold onto some identity. More recently, just this month, he has another article that’s really good, and we’ll provide links to both of these. This is called “The Anti-Social Century.”

What he documents there is that Americans are now spending more and more time alone. He gives great stories. He talks about this restaurant he goes to. The restaurant has shut down the bar because people are ordering out. People aren’t going to the bar at the restaurant. In fact, there weren’t many people in the restaurant. You see this also. He gives some statistics with teenagers. Teenagers are spending far less time together with friends. People spend more time at home, and it’s causing problems. He documents it’s causing problems.

These two themes here in his writing: a search for meaning, identity, something transcendent, but also a search for community. I think both of us, we love the Federal Reserve, we love financial regulation discussions, but we know ultimately our identity is more than that. I’ve enjoyed having a friend like you, Peter, where I can talk shop, but I can also talk religious conversations.

I bring all this up just to motivate the fact that you have some very powerful posts on your religious experience, your walk. I want to just begin with one that honestly almost brought me to tears. This was an article titled, “Finding Addie,” Addie Purnell. Tell us that story and how you see it as a manifestation of your faith and what you see as important in life.

Conti-Brown: Thank you so much for that, David. I’m so grateful for the chance to talk on Macro Musings about these things, even though I think some of our listeners might feel a little bit ambushed by this because it has nothing to do with the Fed, as you say. 

About 10 years ago, in fact, 10 years ago this month, January 31, I was sitting on an airplane. It was Super Bowl Sunday. I was flying through Phoenix, which is where the Super Bowl was. There were all kinds of delays, I think, related to the Super Bowl. I found myself on an airplane and seated next to someone, a stranger. I fell asleep and then woke up to her screaming and yelling. It was because, although I hadn’t observed it at the time, she was there actually with her husband who was seated several rows forward. They were flying standby and one of the last to be seated. He had slumped over and was not responsive. 

Now, I’m an introvert by nature. I don’t draw a lot of energy from talking to people on the plane. I almost never do it. In that moment, I felt called, again, in my religious experience, we’d call this a spiritual prompting. This idea that the Holy Spirit or an inner voice or a connection with the divine is encouraging you to change your behavior. The change of behavior here was the sense that I should get off the plane with this woman. We were being diverted to Memphis instead of going to Philadelphia, where we were headed.

I had a strong sense that this poor woman was going to need someone to walk with her during this. It was very late at night at the time. I just thought, “This is not my place. She’s old, I’m young. She’s a woman, I’m a man. She’s Black, I’m white.” There’s so many reasons why this is just none of my business. I’m an introvert, mostly, and I didn’t want to do it, honestly, but I had a strong sense. Again, from my tradition, I would credit that to God saying to me, in a sense, this is the point of view. The point of view is not the book that you’re finishing. I was in my PhD program at the time.

The point of view is to connect with people like her. I introduced myself to her. It was the first word I’d spoken to her. I asked her if she knew anyone in Memphis who could help her face what she was about to face. She was weeping, and she said no. She didn’t know a soul. I just asked her if it would be okay if I got off the plane with her and helped her. She grabbed my hands and turned to me and thanked me and asked me if I would even consider it. I did.

Beckworth: Peter, just to be clear, her husband passed away on the plane, correct?

Conti-Brown: Shortly thereafter.

Beckworth: Oh, shortly thereafter.

Conti-Brown: He died on the way to the hospital.

Beckworth: He had collapsed in the airplane, that’s the context, right?

Conti-Brown: Yes, exactly, he had collapsed. He wasn’t responsive. There was an EMT on the flight who started doing compressions, and that was enough to revive his pulse, but only gently. We were in the hospital together for hours until about 4:00 a.m. We landed about 9:00 p.m. 

As I anticipated, or as, again, coming from my spiritual framework, as I was prompted, there were an unbelievably impolite number of things that Addie had to confront when we got there. There were police, there were social workers, there was a funeral home that was trying to sell it’s services in Memphis that was totally irrelevant and all kinds of stuff. What I was able to do for Addie that night was just turn the decisions down to a trickle and let her grieve her husband. That’s what I did for Addie. What Addie did for me was she just touched my soul. Her grace and her goodness and her love and her kindness to everyone around her, it helped me see the world in three dimensions again.

Now, to further motivate the context here, I was, at the time, on the job market, and I was getting no attraction. Very few schools were interested in hiring me. I’d gotten a couple of on-campus interviews, one at Wharton, another from another school. The other school made clear that they were not going to give me the offer. I had one chance to get a job, and I did not yet have it. I was so focused on my career at that point that it was causing me enormous stress, even stress in my marriage.

What Addie did for me, it was like this experience of somebody taking me out from—my head had been in the water, and she gave me oxygen again. She helped me see, just like you were saying, David, before, that there’s so much more to this mortal sojourn beyond one more publication, or one more conference, or one more job. Addie became like a second mother to me. I’m still in constant contact with her. I talk to her all the time. She’s very special to me.

I wrote about that for my Substack, because I wanted to tell that story about what it means to find these connections, however we find them. Of course, you could be an atheist or an agnostic person and still make these incredible connections. The religious element for me was that I had to go out of what was comfortable to me natively. That call felt divine to me. The relationship that I was able to form with Addie thereafter, that I still have 10 years later, is one of the most precious blessings that I have in my life.

Beckworth: That was a beautiful story. Again, you have an article on Michael Barr, then you go to this article, you’re brought to tears. It’s beautiful. Again, I think you’re very courageous to reveal this side of you on your Substack. I really encourage listeners to listen to this. You have someone who’s telling you how to run the Fed or what’s a good view of the Fed. It’s good to know they have this deep soul in them too, Peter. It’s really beautiful. 

I just want to mention a few more things. This lady is your family now. Your kids, you mentioned in the article, your kids almost view her as another grandmother. Her family is now your family. If you had to, again, before this happened, put these two families together, very different worlds, it never would have happened. Just taking that time to care. It’s so easy in our world to be focused on numbers, on politics, on the big pictures, but the little things in life sometimes really do matter. This, again, goes back to Derek Thompson’s articles that are so good. The need for community, the need for deeper meaning in life. This story nails it on both fronts.

Conti-Brown: The community part, what I would tell our atheist and agnostic friends for whom religion is this foolish mystery is, we could have lots to talk about the historicity of Christianity, about what happened 2,000 years ago in Galilee and Jerusalem. I think those are useful conversations. My dear friend and co-author David Skeel, who’s also very religious, teaches me all the time not to skip over that part, the doctrinal claims that you make as a Christian are incredibly important. I won’t skip over this.

Let me make another point that you’re pointing at. That is the ability that these religious convictions have given me to form community with people who are very different from me, people with whom I have little in common, but who have completely changed me and saved me and cared for me and nurtured me, is unlike anything I’ve seen in any other part of my life. 

I recently, a year ago, went through an extremely challenging professional time that you and I have talked about before, but I won’t get into detail now, but it was probably the hardest and darkest professional period of my life. At the same time, I was seeing so many invitations and opportunities for beauty and truth and meaning coming to me from people in my religious community, who have absolutely no idea how it is that I make my living. It does not compute to them. These are folks who’ve never been to college or have no idea really what the Federal Reserve is, and none of that matters because we’re there for each other on a different frontier. That reminder has been such an anchor to me in my life.

Beckworth: You have another great story. Maybe for the sake of time, we won’t go to it, but in 2008, you also had some big challenges in both your world at Stanford and your religious world, which were very different, yet they all came together in community with such a key part of that story. We’ll provide a link to that. I do want to go back to your story with Addie Purnell and the time we have left. A skeptic might say, “That’s a wonderful story. We’ll just chalk it up to serendipity. You just happen to be there at the right time. You just happen to be in the right mood.”

I would chalk it up, as you said, to providence. I think you were there for a reason, to make a difference in this person’s life. I bring this up because I’ve been thinking about this a lot. I guess it’s providential I have you on the show now, given what I’ve been thinking about.

There’s a book that came out, I believe, last year. It’s called Fluke by a guy named Brian Klaas. I think he’s at London School of Economics. He’s, I think, agnostic. It’s a really fun book, but it’s a book on chaos theory, on the butterfly effect. Throughout the book, he mentions, you change one thing, you change everything, given enough time. You walk out the door at 5:30 versus 5:00 a.m., you meet someone you never would have met. Their life is forever affected. Being in the right place at the right time. Either, Peter, it was dumb luck you were on that plane, or there was a reason you were there. Again, I just encourage our listeners to think, is it serendipity or is it providence when you are put in certain places for certain things? In your case, it was clearly you made a big difference in this person’s life.

Again, what does this have to do with monetary policy, financial policy? I would argue it’s good to know people who are thinking about these issues have some sense of the transcendent, some sense of why we’re here beyond just the 80, 90 years we’re alive.

Conti-Brown: I’ve been reading a lot lately in some political philosophy, including William James, who with Ludwig Wittgenstein, are my two favorite philosophers. In Jamesian pragmatism—James was a religious ecumenist. He just devoured all kinds of texts in all kinds of religious traditions. I think what helps me is a very Jamesian and pragmatist frame. That is, maybe it was serendipity, maybe it was providence, but how are you different when you act on one versus the other assumption?

Because I have acted on the assumption that Addie Purnell was put in my life for cosmic reasons, that this is a relationship that I should pursue and cultivate, that this wasn’t happenstance, the meaning and beauty and transcendence that I’ve experienced have been extraordinary. In that sense, it becomes a pragmatic truth. It is an idea that who I become when I act according to those intuitions is so much better than who I would be otherwise.

That providential impulse for me is part of that Jamesian wager, is finding that truth that motivates me and changes me and brings me into a posture of encountering challenges or difficulties that otherwise might be quite existential, but for me now become part of the beautiful experience of life. So that when these professional disturbances might occur, I take them in stride. I take them as part of the journey.

Radical Uncertainty

Beckworth: That’s a beautiful telling there, Peter. Let’s end on one final article in your Substack. The Substack is what’s motivated this conversation that we’ve gone into, these personal essays. You had a really thoughtful but personal essay called “In Defense of Radical Uncertainty.” We’ve been talking about our faith, but we want to maybe step back and say, “How do we know what we believe is right? How do we know what we’re doing is truly driven by providence versus serendipity?” The story you tell about you and your son having these deep conversations, I really loved it. Let’s close on this account from your Substack.

Conti-Brown: This was on Halloween. I have four children, and my three youngest were out trick-or-treating and I was home with my oldest son. This is, of course, in the intensity of the political season. He knows that his mother and I had our preferred candidate in the election, who was, of course, his preferred candidate as well. He asked me, how do I know that candidate was going to be better than the other? How do I know that?

I said, “My boy, pull up a chair. We’re going to have some dinner and conversation because here’s my short answer: I don’t know.” Here’s what it means to know. The way that I think about epistemology, this way of knowing, is that some of the things that we “know” are motivated by loyalty. He knows that he preferred one candidate over another, in large part, because of who his parents preferred. Sometimes our loyalties are anti-loyalties. We have strong views because we don’t like somebody who has the other view, so we take the other side almost reflexively.

Sometimes we have a view because we have an ideology, we have a way of simplifying the world, and those simplifications, those shortcuts, those are necessary for everybody. Everybody has an ideology, but that ideology, it’s a cheat in a sense. It’s a shortcut. That’s how two people in good faith with total integrity and intelligence can come to polar opposite views because they’re each cheating in a sense, they’re each taking shortcuts.

Then I concluded with him saying, “Listen, on most things, here’s my ideological frame. It’s a cheat. It’s a shortcut. Here’s what it is: radical uncertainty. The number of questions on which I have an informed opinion is tiny. That means that as we move through the world, you’ll hear a lot of people expressing lots of high conviction, high certainty statements. For me, as someone who espouses radical uncertainty, as I call it, that means I’m just skeptical of almost all of that.”

Then on a very, very, very small number of topics, I will have what I called expertise. The more expertise I gain on a topic, the less sure I am, the more uncertainty I see. Some people might say, “How can you be a Christian and a Mormon and espouse radical uncertainty?” That might be a topic for another blog post another day, but these all fit together. They fit together in a sense that has motivated me as a scholar, as a husband, as a father and, yes, as a religious person, because I see in this world just incredibly delightful and inviting complexity.

That makes it much easier for me to appreciate that other people come to very different conclusions about the same set of circumstances, because they, like me, are subject to these same kinds of ideological frames. That just makes it a lot easier for me to see the world both as it is and as I would hope it to be. That’s my defense of radical uncertainty.

Beckworth: With that, our time is up. Our guest today has been Peter Conti-Brown. Be sure to check him out at PCB Central on Substack, as well as on Bluesky. Peter, thank you once again for coming on the podcast.

Conti-Brown: What a pleasure to talk with you, David. Thank you so much.

Beckworth: Macro Musings is produced by the Mercatus Center at George Mason University. Dive deeper into our research at mercatus.org/monetarypolicy. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other thoughtful people like you find the show. Find me on Twitter @DavidBeckworth. Follow the show @Macro_Musings.