Did central banks gain too much clout in pandemic: An economist explains

 Christina Parajon Skinner, an assistant professor at the Wharton School and former legal counsel at the Bank of England, probes the question.

Central banks were the first economic responders to the Covid-19 pandemic. From Washington to Wellington, policymakers swiftly deployed tools developed during the global financial crisis and found new ways to shore up credit markets vital to the functioning of modern commerce.
Learning from the 2007-2009 fiasco, they moved with great speed and scope. Monetary authorities were aided by their independence: They had credibility with investors and businesses that allowed them to take bold steps and weren’t subject to the political horse-trading and delays that usually come with fiscal stimulus. But some lessons may have been taken too far. Do central banks have too much clout and shape policy too expansively in too many areas? If so, does that imperil the very autonomy that makes them so effective? Christina Parajon Skinner, an assistant professor at the University of Pennsylvania’s Wharton School and former legal counsel at the Bank of England, probes these questions extensively in her “Central Bank Activism” paper, scheduled to be published next month in the Duke Law Journal.

I discussed with Skinner how the Fed used the enormous power at its disposal — and the potential costs of such a muscular role — particularly in light of the current White House deliberations over whether to nominate Federal Reserve Chair Jerome Powell for a second term. (Fans say Powell did a good job during a once-in-a-lifetime crisis, while most detractors claim he was too easy on banks and is insufficiently attentive to environmental concerns. There are also upcoming vacancies for the positions of Fed vice chair and vice-chair for supervision.) The transcript has been edited for length and clarity.

DM: A barrage of emergency measures has been called upon twice within 12 years. Can they even be called unconventional anymore and how likely is it that central banks go down this route time and again?