” entered the lexicon of modern central banking. for those few who are unaware, section 13 ( 3 ) was added to the federal reserve act during the great depression. it gave the board of governors broad authority to permit a reserve bank to lend in exigent and unusual circumstances provided that the reserve bank was secured to its satisfaction. prior to the crisis, section 13 ( 3 ) loans had last been made during the depression, to such enterprises as a typewriter manufacturer and a vegetable grower. 4 fed policy makers and their advisors pulled section 13 ( 3 ) back off the shelf, perhaps brushing some metaphorical dust off its cover. in 2008, loans made pursuant to section 13 ( 3 ) facilitated jpmorgan chase ’ s purchase of bear stearns. loans under 13 ( 3 ) also prevented the potentially catastrophic failure of american international group ( aig ). innovations under 13 ( 3 ) also underpinned many of the fed ’ s broad - based facilities to provide market liquidity. the fed created a variety of facilities under 13 ( 3 ), giving rise to an alphabet soup of new acronyms. 5 those facilities provided liquidity to different segments of our economy, ranging from primary dealers to issuers of commercial paper. their broader purpose, however, was to facilitate the availability of credit to businesses and households through on - lending. not all of the fed ’ s responses involved lending, either under section 13 ( 3 ) or at the discount window. on the supervisory side, the federal reserve ’ s supervisory capital assessment program ( scap ) ( the “ stress test ” of the 19 largest us financial institutions ) addressed uncertainty about their ability to weather additional losses. the results were disclosed publicly in a significant departure from standard practice to keep supervisory information confidential. transparency, as well as the availability of a government backstop, encouraged confidence in us institutions. of course, the fed ’ s actions did not happen in a vacuum, but rather in the context of other actions taken by other regulators and congress. perhaps most notably, in october 2008, congress passed the emergency economic stabilization act. that statute allowed, among other things, treasury to create the troubled asset relief program to inject capital into financial institutions. in addition, the federal deposit insurance corporation expanded its guarantees of bank liabilities under the temporary liquidity guarantee program. the federal housing finance agency placed fannie mae and freddie mac into conservatorship. non - us authorities responded to crises in their own jurisdictions. and really this

safeguarding central bank independence1 javier guzman calafell2 the broad turn towards central bank independence can be traced back to the 1970s and 1980s. many countries were experiencing high inflation. therefore, attention focused on overcoming ‘ time inconsistency ’, a problem inherent to monetary policy. this is the risk that policymakers, for political reasons, will aim for short - term gains through expansionary policies, since their costs will not be visible immediately. proposals to enhance central bank independence emerged as a viable device to face these challenges. the case for independence has strong underpinnings, but there has been growing doubt over its merits. this was initially a consequence of the monetary policy response to the 2008 financial crisis, particularly in the largest advanced economies. first, amid low inflation, some argued central bank independence was no longer justified. second, as major central banks implemented quantitative easing measures, there were concerns these institutions would end up shaping fiscal policy, which is beyond their remit. third, greater central bank involvement in financial stability raised doubts about entrusting them with too many endeavors, and on the consistency of these tasks with independence. fourth, detractors of independence identified it as an obstacle to coordinate monetary and fiscal policies, while also worrying about the distributional implications of quantitative easing. this is a slightly edited version of an article prepared for “ global public investor 2019 ”, published by the official monetary and financial institutions forum ( omfif ) on june 12, 2019. deputy governor at the banco de mexico. the views and opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the institutional position of the banco de mexico or of its board of governors as a whole. these arguments are paradoxical. in the absence of an adequate and timely reaction by fiscal and structural policies in the aftermath of the financial crisis, monetary policy became the only tool to bolster the world economy. there are also strong indications that, without independence, central banks would probably not have been able to undertake the measures needed to face the crisis. furthermore, the above - noted question marks about the merits of central bank independence can be easily refuted : independence is still needed in a low - inflation environment. inflation declined partly as the result of the recessionary effect of the financial crisis. there are other factors helping to contain inflation, but their future potential impact is uncertain. trade - offs with financial stability goals have always existed, as well as incentives to consider them. consistency of public finances with