Understanding Federal Reserve Policy: It's Politics, Not Economics

So says economist Arnold Kling:

Rather than try to come up with an economic theory to explain Fed policy, I would suggest a more cynical approach. The goal has been to transfer wealth to banks and to the holders of mortgage securities. The thinking is that those constituents are more important to the economy than taxpayers….The Fed has changed from a central bank to a piggy bank. Any economist who tries to interpret Fed policy from the standpoint of economic theory is playing a fool's game.

My November 2009 Reason magazine feature on the anti-Fed political movement.