Fed humor; We need tools to prevent the bubles our policies create

Sechel

Eric Rosengren, president of the Federal Reserve Bank of Boston, told the Financial Times that the Fed lacked sufficient tools to “stop firms and households” from taking on “excessive leverage” and called for a “rethink” on “financial stability” issues in the US.

Mary Daly, president of the Federal Reserve Bank of San Francisco, this week told reporters that she did not see much connection between loose monetary policy and financial risks.

....
Sounds like the Fed is suddenly concerned about creating a Minsky Moment

Rosengren theorized that the “slow build-up of risk in the low-interest-rate environment that preceded the current recession” could likely contribute to a more difficult economic recovery.

“The increased risk build-up, such as the reaching-for-yield behavior in commercial real
estate or increased corporate leverage, make economic downturns including this one more
severe,” he said. “These are issues that I and others spoke about quite extensively in the years before the pandemic hit, in particular with respect to questions about the need for accommodative interest rates when the economy was doing well, and the potential for a build-up of financial stability risks.”

Comments (9)
No. 1-5
KS123
KS123

Abolish themselves! Problem solved, I mean, no longer exists!

Sechel
Sechel

I take the Fed's concern akin to a kid eating cake all the time and suddenly worrying that maybe he should stock up on insulin in case he becomes a diabetic. Maybe he shouldn't be eating cake all the time

PecuniaNonOlet
PecuniaNonOlet

Whatever happened to “audit the fed” anyway? Why does this organization continue to exist without any real oversight. Is the fear that the truth will come out - the whole thing is a house of cards built on paper lies? I think the world already knows that, lets burn it down and start over.

Sechel
Sechel

No tools? Fed can change margin requirements on stocks and require banks to limit leverage. They have all the tools they need

Lance Manly
Lance Manly

"I'd opt to rewrite the Fed's mandate to only focus on stable pricing "

Now the fed insists on inflation.