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38 Yale J. on Reg. 1 (2021)

handle is hein.journals/yjor38 and id is 1 raw text is: Towards an Administrative Law of Central Banking Peter Conti-Brown,t Yair Listokintt & Nicholas R. Parrillottt A world in turmoil caused by Covid-19 has revealed again what has long been true: the Federal Reserve is arguably the most powerful administrative agency in government, but neither administrative-law scholars nor the Fed itself treat it that way. In this Article, we present the first effort to map the contours of what administrative law should mean for the Fed, with particular attention to the processes the Fed should followin determining and announcing legal interpretations and major policy changes. First, we synthesize literature from administrative law and social science to show the advantages that an agency like the Fed can glean from greater openness and transparency in its interpretations of law and in its long-term policymaking processes. These advantages fall into two categories: (1) sending more credible signals of future action and thereby shaping the behavior of regulated parties and other constituents, and (2) increasing the diversity of incoming information on which to base decisions, thereby improving their factual andpredictive accuracy. Second, we apply this framework to two key areas-monetary policy and emergency lending-to show how the Fed can improve its policy signaling and input diversity in the areas of its authority that are most expansive. The result is a positive account of what the Fed already does as an administrative agency and a normative account of what it should do in order to preserve necessary policy flexibility without sacrificing the public demands for policy clarity and rigor. Introduction ................................................................................................ . 3 I. The Advantages of Central Bank Transparency and Openness...........11 A. Signaling Credible Commitment ............................................ 11 1. Realistic Contingency Planning........................................ 16 2. Staking the Reputations of Officials and the Agency......... 17 t Assistant Professor at The Wharton School of the University of Pennsylvania and Nonresident Fellow in Economics Studies, The Brookings Institution. ?? Shibley Family Fund Professor of Law at Yale Law School. t?? Professor of Law at Yale Law School. We thank Maggie Blackhawk, Howell Jackson, Brian Libgober, Jerry Mashaw, Richard Pierce, David Vladeck, Wendy Wagner, David Zaring, and participants at workshops at the Brookings Institution, the University of Pennsylvania Law School, and Yale Law School. We also thank Peter Bassine, Edwin Bogert, Mary Jane Dumankaya, and Steffi Ostrowski for helpful research assistance. 1

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