Fed Policymakers Warn Work Needed To Help Implement Economic Safeguards
The Federal Reserve Bank of Boston recently hosted a conference attended by Fed bank presidents and other policy makers. During the conference, many leaders of the financial agency cautioned that the Federal Reserve has a long way to go if it hopes to prevent another US financial crisis like the one occurring in 2008. The New York Times reported that a “troubling reality” highlighted at the conference was that Fed policymakers have made scant progress in placing safeguards to stave off another financial crisis. Senior Fed officials described the possibility of a financial crisis as difficult to anticipate or prevent. MarketWatch reported the “current U.S. regulatory structure designed to prevent another financial crisis is ‘Balkanized,’ a ‘mess’ and likely to fail when needed, experts said.” Adam Posen, president of the Peterson Institute for International Economics, said at the conference, “The current U.S. institutional set-up is likely to fail in a crisis, and will be doing less to prevent a crisis than it should be.”
Meanwhile, New York Fed President William Dudley said Fed policy makers are “a long way” from being able to properly use macroprudential safeguards to identify risks to financial stability as they are developing and acting in time to stop future crises, Bloomberg News reported. Dudley indicated that the U.S. has a fragmented regulatory structure, which, according to Bloomberg, would prevent “any single regulator from being able to implement risk-reducing tools in a broad enough fashion.” Echoing these sentiments, Reuters reported that Fed Vice Chair Stanley Fischer said that the tools available to the Fed to limit asset bubbles and encourage financial stability are neither large nor “battle tested,” calling on regulators to do more research on ways to improve financial stability.
What This Means For Small Businesses
Small business owners are no stranger to uncertainty in all aspects of starting, operating, and growing their businesses. However, Federal Reserve policies have led to increasing uncertainty for small businesses, particularly as they attempt to plan for higher interest payments in the face of possible interest rate increases. The latest publicly-reported comments from policy makers at the Federal Reserve are a troubling indicator that the agency is continuing to operate in ways that will extend economic uncertainty for the small business community.
Additional Reading
MarketWatch, Bloomberg News, the Wall Street Journal, and Reuters were among the additional outlets covering comments from Fed policy makers.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.
