19i, beginner's guide to central banks

In the Schweser text, the book states that a central bank must have 3 things: independence, credibility, and trasparency. Can someone explain how these obligations work in real life?

You’ll have to excuse my ignorance but I’m a bit of a novice at this.

  1. The USA’s “central bank” is the federal reserve, right?

  2. This was run by Alan Greenspan during the tech boom and was run by Ben Bernanke during the mortgage crisis buildup. What is Timothy Geithner’s role in all this? I guess i’m not sure what the separation in responsibilities are.

  3. The central bank lends money to who exactly? Retail banks such as BoA, CITI, and Wells Fargo?

  4. Why was the central bank originally created? Was it to print a currency that would unify our nation and economy? If so, was the idea of lending to retail banks added on in some form of mission creep? I’m trying to look at this from a 1790s, limited government, libertarian point of view.

  5. Is the central bank actually independent of politics in real life? The reason I ask is because I read somewhere that the central bank somehow forced retail banks to lend money to unqualified buyers (impoverished Blacks and Hispanics). I guess we are to assume that Bill Clinton or Jimmy Carter’s policies in someway influenced the federal reserve. Without turning this into a political debate, please comment on the veracity of that statement.

  6. The section on credibility states that a good central bank is taken seriously when it says it wants to control inflation. At the risk of sounding like a fool, why is it the central bank’s obligation to “control” the rate of inflation? What would happen if we dismantled the fed? What’s the worst case scenario?

  7. During the presidential debate, a candidate (maybe Newt Gingrich) said that the Fed should be auditted. What would we look for in an audit? If they lend money, what are we afraid to find in an audit?