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WSJ: A Reshaped Fed Is Likely to Gain Some Powers, Lose Others

During its 96-year history, the Federal Reserve has seen a handful of moments that led elected politicians to reshape it. The Fed is at such a turning point now.

History may show that the Fed helped stave off another Great Depression in 2008, but the radical steps it took along the way make it more politically vulnerable than it has been in decades. A broad re-examination of the Fed's role in the financial system and its governance is beginning to take shape.

During the Depression, the central bank's mandate was expanded to allow it to lend broadly in emergencies and, later, power inside the Fed was shifted to Washington from New York. In the 1950s, an accord with the Treasury freed the Fed from pegging long-term interest rates. In the 1980s, Paul Volcker strengthened the Fed's credibility, if not always its popularity, when he withstood criticism and whipped inflation by jacking up interest rates. In the 1990s, the Fed gradually took steps toward more openness, announcing when it moved interest rates, for instance.