The Fed: The Inside Story of How the World's Most Powerful Financial Institution Drives the Markets

As a prolific author and respected economics scholar, Mayer has been immersed in the financial world for decades and provides both bird's-eye and long-range views of money's complicated maneuverings. Without his excellent storytelling abilities and fluid writing style, this book would be heavy going for anyone who doesn't speak the language of high finance. Though it is most definitely dense (and its structure somewhat erratic), Mayer manages to make a complicated subject accessible for those with more interest than actual knowledge. An informative look at a hitherto enigmatic but influential institution. --S. Ketchum

Product Description

The Fed has entered a new era, and hardly anyone understands the rules of its game. Where once it could control the economy by controlling what the banks did, it now must push directly on the markets. But how? Why do interest-rate changes sometimes move the markets as expected, and sometimes fail to have any effect? What else is the Fed doing that might affect asset prices and growth rates? The links between Fed decisions and market reactions have become far more complicated and confused than ever before. What is an investor to make of it?

In The Fed, one of the world's best financial journalists offers a major new explanation of how the Fed works and how its world has changed. Martin Mayer is the bestselling author of The Bankers and The Bankers: The Next Generation, among many other books. He knows more about the banking system, the markets, and the Federal Reserve than anyone else writing today. The Fed is the first book to explain why all the old rules for Fed watchers are no longer operative, and what it is that investors must know to understand the Fed today. For anyone who wants to know why Alan Greenspan is hailed as the second most powerful man in the United States, The Fed is essential reading.

Mayer offers many behind-the-scenes stories from past and present Fed administrations, and he explains the overlooked significance of recent dramatic expansions in the Fed's powers and perks. Why does the Fed care about the difference between 30-year and 29-year bond yields? Why and how did the Fed join with its district banks in organizing the bailout of Long Term Capital Management? How was the age-old war between the Fed and the Comptroller of the Currency finally resolved in 1999? Why has the increased "sunshine" of announcing market interventions and posting proceedings of the Federal Open Market Committee not led to greater market stability? Why did Greenspan make the key decision of the Clinton boom years -- to let the good times roll while unemployment sank to record lows -- despite all historical evidence that it would be inflationary? These are just some of the questions answered in this wide-ranging, sharp, and entertaining book.

If you are a hard core economist with strong political views or an ardent fan of Friedman or Greenspan you won't like it. It shows the human side of many of the major figures.

I thought it was well done and enjoyed it immensely. I have read most of the major books on the Fed and read their open market operations briefs every day, and spend a lot of time on the various Fed websites.

This book is generally sound, and although there are those who would tend to dismiss Mayer, as he is not an economic scholar, the great strength of this book is that Mayer realizes that the Fed is not a university seeking truth. It is a political and financial institution not above the day to day fray, with its own sort of organizational politics.

I have also read most of the major books about Greenspan, and this one adds a dimension to his persona that connected the dots for me.


The best book on the subject I've encountered   April 23, 2007
Vitya (London, UK)
1 out of 1 found this review helpful

If you are starting out in finance and want to know how the Fed works, this is the best book for you. It's not the easiest or the smallest, but it is the most illuminating. This book was very helpful to me when I started on Wall Street. It's a bit long (to be fair I'm still about 100 pages away from finish) but will make you understand why, as of April 23, 2007 "The 13 1/4 percent bond due in 2014 that the government sold on May 15, 1984, returned an annualized 24 percent. The S&500 returned 13 percent, including dividends, during the same period. Bonds gained more than shares of Motorola Inc., DuPont Co. and Duke Energy Corp." - this is from today's Bloomberg.
This and reading Pimco's McCulley/Gross monthly pieces is a must if you want to understand what's driving world capital markets.


Tempted to give five stars...   August 27, 2006
framzimpet
2 out of 2 found this review helpful

Martin Mayer has been writing about banking for decades. He has held positions in government, and testified as an expert in various governmental committees. He has known personally many of the people about whom he is writing in this book.

His writing style is dense. He often assumes the reader is familiar with banking terms or processes (or can go look them up). If you can get through this, the information he provides is priceless. I came away from reading this book with a variety of insights into banking and the federal reserve that will continue to inform me for years to come. I have read a number of books on the fed, and this is certainly one of the best (along with Greiders).


If you are an investor...   August 17, 2001
3 out of 7 found this review helpful

If you are an investor and you need to know how the Fed influences the stock market among others...

If you bought and read "Secrets of the Temple" by William Greider and maybe "Leadership at the Fed" by Donald Kettl...

If you understood them and knew who the named people were...

Then you should buy this book too.


Some interesting points   September 14, 2001
Ed Dunne (San Francisco)
2 out of 12 found this review helpful

This book provided some interesting points and information, but jumped around in time and topic in a manner that disrupted its flow.