Luckily, America hasn’t yet been confronted with a financial crisis “fix” that exceeds its capacity to borrow. But to ensure that doesn’t happen in the future, institutions need to be appropriately sized so that they aren’t crucial enough to create the hope for financial help when times get tough.
In addition to the Fed being held more accountable, there must be implementation of performance-based incentives for a job well done. Equally, there needs to be clear consequences to the Fed for poor performance. Only after we plug this regulatory sophistication gap at the Fed can confidence in this agency be restored.