The article is on the problems the Fed has had, but stressed that that while flawed, it is still important not to let it lose its independence.
Read it all. It is long, but very well done.
I will give a few tidbits to tempt you to read the whole thing. It really is worth it.
FT.com | Willem Buiter's Maverecon | What to do with the Fed:
"It is a mainstream view that the Fed has failed to foresee and prevent the crisis, that it has managed it ineffectively since it started, and that it has allowed itself to be used as a quasi-fiscal instrument of the US Treasury, by-passing Congressional control. Are any or all of these criticisms justified? Let’s ponder a few of them."
He then goes on to show that the Fed and many others missed the crisis until it was too late. SO sure the Fed deserves some of the blame but so too do others.
On regulation's failure:
"...the whole mishmash of US financial regulation and supervision has long been viewed as a school book example of how not to structure such activities. Fragmentation, balkanisation, overlap, turf battles and unproductive inter-agency rivalry and jealousy are the name of the game. With federal commercial banking supervision split between the Fed, the FDIC and the Controller of the Currency (not counting the Office of Thrift Supervision for federal savings banks) and investment banks (not) supervised and regulated by the SEC, the US regulatory framework was an accident waiting to happen. Federal securities markets regulation and supervision is, for no good reason, split between the SEC and the Commodity Futures Trading Commission. The SEC - discredited and without its investment bank constituency - is an organisation begging to be put out of its misery."
and on the Fed now:
"The Fed has been actively contributing to the next crisis
Here indeed the Fed stands guilty as charged, although it is in good company. The Fed, through its lender of last resort and market maker of last resort actions and through a wide range of quasi-fiscal support operations it has undertaken on behalf of Wall Street and other segments of the US financial establishment (Fannie & Freddie, AIG), has made a major contribution to the creation of the biggest moral hazard machine ever seen in human history."
There are many other great points left out here, but the conclusion is worth pointing out for those of you who do not click through:.
"If the same institution, the central bank, has to be in charge of both normal monetary policy and systemic risk regulation (albeit jointly with the Treasury for the systemic risk role), there is no elegant, first-best solution. Either monetary policy will be driven by politicians whose macroeconomics is limited to a partial understanding of the Keynesian cross and whose monetary policy views can be summarised by the proposition that the have never seen an official policy rate so low they would not want it even lower, or the central bank continues to act as an off-budget, off-balance sheet special purpose vehicle of the Treasury."
Cutting through all of the very important stuff before (who is to blame, what went wrong, etc etc etc), the whole article is worth it if you only read and understand that conclusion.