Federal Reserve’s Role is Expanding Beyond its Niche

For most of its history, the Federal Reserve has been a high temple of monetary matters, guiding the economy by setting interest rates but remaining aloof from the messy details of day-to-day business.

But the financial crisis has drastically changed the role of the Fed, forcing officials to get their fingernails a bit dirty.

Since March, when the Fed stepped in to fill the lending vacuum left by banks and Wall Street firms, officials have been dragged into murky battles over the creditworthiness of narrow-bore industries like motor homes, rental cars, snowmobiles, recreational boats and farm equipment — far removed from the central bank’s expertise.

A growing number of economists worry that the Fed’s new role poses risks to taxpayers and to the Fed itself. If the Fed cannot extract itself quickly, they warn, the crucial task of allocating credit will become more political and less subject to rigorous economic analysis. Read more about the Federal Reserve…