Academic

One of the Obama administration officials I find particularly interesting is Dan Tarullo.  He is

1. not a banker,
2. a former law professor, and
3. somewhat critically inclined regarding conventional monetary policy and banking regulation. 

Nonetheless, he has found himself on the board of the Federal Reserve, recently justifying its decision to keep the federal funds rate low to a bunch of bankers. Perhaps it isn't how he imagined he'd be doing things at the central bank.  Anyway, one treads into monetary policy cautiously as a lawyer, but usually, the Fed sets monetary policy through the aforementioned federal funds rate offered to its member banks.  Te Fed is trying to reassure the markets that there won't be galloping inflation because it will be using unconventional tools, all rooted in the massive amount of stabilization it has already done for the banks, instead of the federal funds rate, to prevent it.  Hence Tarullo:

In other words, the claim is that monetary policy can be set in a different way.  That strike sme as interesting, and a direct result, of course, of all the intervening the Fed did during the crisis.  Fr those interested, after the jump I'll give you Tarullo's plain English description of what, exactly, the Fed did then.  It's pretty easy to follow.

Second, and separately, the Federal Open Market Committee (FOMC) undertook large-scale purchases of Treasury securities, agency mortgage-backed securities, and agency debt. This unconventional monetary policy action was taken because the FOMC, after having reduced short-term interest rates nearly to zero, determined that the severity of the economic downturn made additional stimulus necessary. In addition to improving conditions in mortgage markets, these asset purchases helped lower yields on long-term debt; they also substantially increased the level of reserve balances that depository institutions held with Federal Reserve Banks.