June 23, 2009

Notwithstanding Chancellor Merkel’s criticism of the new powers of the Fed, Europe has gone in a direction similar to the U.S. European regulators have proposed a new oversight role for the ECB, quite similar to that of the Fed. On the monetary side, the European response of the ECB has also been similar to that of the Fed. However, to the extent that the ECB has been less aggressive regarding private bank guarantees implicit in programs like TARP, TALF, etc., credit creation by European monetary authorities has been much smaller than by the Fed.

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