------------ EH.NET BOOK REVIEW --------------  
Published by EH.NET (June 2006)  
  
R.W. Hafer, _The Federal Reserve System: An Encyclopedia_. Westport,   
CT: Greenwood Press, 2005. xxxii + 451 pp. $95 (hardback), ISBN:   
0-313-32839-0.  
  
Reviewed for EH.NET by Daniel Giedeman, Department of Economics,   
Grand Valley State University.  
  
  
In the preface to _The Federal Reserve System: An Encyclopedia_, R.W.   
Hafer states: "The purpose of the book is to provide an introduction   
to the Federal Reserve and related topics. ... If successful, this   
will be the first, not the last, book that you'll read on the subject   
of the Federal Reserve." By this standard, the _Encyclopedia_ is a   
solid accomplishment as it provides clear and accessible expositions   
on a wide variety of topics related to the Federal Reserve System.   
Hafer, currently the Chair of the Department of Economics and Finance   
at Southern Illinois University, Edwardsville, served for a decade as   
a Research Officer at the Federal Reserve Bank of St. Louis, a   
position that clearly prepared him well to author this volume.  
  
In total, the _Encyclopedia_ contains 280 entries on an array of   
subjects including bank legislation and regulation, the commercial   
banking system, the conduct and goals of monetary policy, financial   
market panics, macroeconomics, policy credibility, policy   
transmission mechanism and problems in banking. The volume also   
contains approximately forty biographical entries on various Fed   
chairmen, U.S. presidents and members of Congress, traditional   
academic economists and other persons of relevance. (Additionally,   
Appendix B of the volume gives a chronological list of every Federal   
Reserve Board Chair, Vice-Chair and Member of the Board of Governors.)  
  
The average entry length is approximately 700 words, but the lengths   
of entries vary fairly widely (the entry for Nancy Hays Teeters, for   
example, is only 75 words long while Hafer discusses the Great   
Depression for more than 2700 words). The entries are generally   
concise, comprehensible and self-contained (a key benefit for Hafer's   
general audience that allows readers to quickly learn about the topic   
in which they are interested without having to invest significant   
time reading background material). Almost all entries end with   
suggestions for further reading, the majority of which are books or   
articles published in the various Federal Reserve Banks' reviews.  
  
With regard to economic history, the _Encyclopedia_ opens with a   
thirteen page introduction outlining the history of central banking   
in the United States from Alexander Hamilton to the September 11th   
terrorist attacks of 2001. This introduction, which nicely provides   
historical context for the Federal Reserve and the development of   
monetary policy, ends with a reference list of twenty-six suggested   
books for further reading. In addition to the focus on history in the   
introduction, Hafer has incorporated history throughout the   
_Encyclopedia_, helping his readers to learn not just what the   
Federal Reserve is today, but also to understand the historical   
experiences that have shaped the Fed over time. Readers who take the   
time to read the entire volume (or at least find their way to the   
appropriate entries) will find that it provides a nice history of   
thought concerning the development of monetary policy in the United   
States.  
  
By my rough count, approximately one third of the entries in the   
_Encyclopedia_ have at least some historical bent to them. While some   
entries, such as "First Bank of the United States," "Panic of 1907"   
and "Banking Act of 1933," are for obvious reasons almost entirely   
historical in nature, Hafer also often places potentially ahistorical   
entries into their historical context. The entry on "Investment   
Banks," for example, includes a paragraph discussing investment   
banking activities in the 1920s prior to the passage of the   
Glass-Steagall Act, while almost half of the four page entry on   
"District Federal Reserve Banks" focuses on the process of   
determining in which cities district banks would be located. Many of   
the biographical entries are a nice source of historical content (for   
instance, the entry for Nelson Aldrich contains a discussion of   
"Silver Republicans"). The biographical entries are also useful for   
tracing the evolution of ideas related to the implementation of   
monetary policy.  
  
Despite my overall favorable impressions of Hafer's volume, I do have   
a few minor quibbles. When I teach my course in Money and Banking, a   
question that comes up almost every semester is "Who owns the Fed?"   
While this question is answered in Appendix A of the book, which   
provides the Federal Reserve Act itself, Hafer's target audience   
would likely find useful a separate entry devoted specifically to the   
topic of ownership of reserve bank stock. I mention this, in part,   
because there is currently no lack of misinformation available to the   
public concerning the "secretive and powerful Federal Reserve Bank"   
(as the back cover of the _Encyclopedia_ itself describes the Fed)   
and Hafer's book could have worked better to counter false or   
misleading information. Another slight modification readers might   
have found useful would have been if Hafer had augmented Appendix C   
to not only list the Federal Reserve Regulations and give their   
purpose, but also to have given the dates of their enactment,   
modification, and repeal, if applicable.  
  
In summary, Hafer has succeeded in creating a concise, coherent,   
eminently readable introduction to the Federal Reserve System. While   
I think the _Encyclopedia_ would be of somewhat limited usefulness   
for economics researchers, it will undoubtedly prove helpful to   
students and interested laypersons. Instructors, particularly those   
teaching Money and Banking or Macroeconomics, will likely find the   
volume useful in their courses and I also expect that instructors   
teaching economic or financial history will find ways to utilize the   
book in their classes. College libraries should add the   
_Encyclopedia_ to their collections. High-school and public libraries   
would also benefit their readers by putting a copy of the book on   
their shelves.  
  
  
Daniel Giedeman's publications include "Branch Banking Restrictions   
and Firm Finance Constraints in Early-Twentieth-Century America,"   
_Journal of Economic History_ (2005).  
  
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