Fed Vice Chair Stanley Fischer Speaks at the Chamber of Commerce
U.S. Chamber of Commerce Center for Capital Markets Competitiveness
“The Federal Reserve: A Conversation with Vice Chair Stanley Fischer”
Friday, July 17, 2015
Key Topics & Takeaways
- Stress Tests and Living Wills: Fischer said stress tests are a positive development because they allow time for the correction of problems before times of stress. He further defended the living will process, stating that “if you have a large balance sheet, you owe it to society to reduce the impact of that thing blowing up.”
- Fed Regulatory Authority: Fischer said the financial crisis was a result of the failure of the previous regulatory system, commenting that “the trouble with things that work for a while is that you get sloppy.” He said stronger capital requirements are a result of a need to tighten bank regulation, but that financial regulation cannot be the role of the Fed alone. Asked about the duplication of regulations, Fischer admitted that more coordination with the other financial regulators could be useful.
Panelists
- Thomas J. Donohue, President, U.S. Chamber of Commerce
- Stanley Fischer, Vice Chair, Federal Reserve Board of Governors
Federal Reserve Transparency
Federal Reserve Vice Chair Stanley Fischer explained that the Federal Reserve’s independence in monetary policy is critical because central banks are focused on the long-term, rather than “looking at doing something for a year.” He stated that a central bank that is not independent could be used for the purposes of government finance, which “often gets out of control.” However, he also insisted that the Federal Reserve’s dual mandate is set by Congress through legislation and defended the Fed as being the most transparent central bank in the world.
Lender of Last Resort
Thomas Donohue, President of the U.S. Chamber of Commerce, asked if the Fed has as much power to act in times of crisis as it should Fischer answered that panics are very difficult to deal with and that central banks have to act to stop them. He emphasized the role the Federal Reserve serves as lender of last resort, and noted that the financial crisis saw the Fed act as a “market maker of last resort.” Fischer stressed that the Fed’s emergency lending powers are important and warned against losing any such tools that could be useful in a crisis.
Too-Big-To-Fail
Donohue asked how the problem of “too big to fail” banks can be avoided while still promoting economic growth. Fischer answered that banks must generate capital and increase capital capacity to deal with losses so that there is less need for a government bailout. He noted that while the government does not want to encourage banks to make loans “they know will go bad,” but that regulation should not restrict them from lending altogether.
Fischer said stress tests are a positive development because they allow time for the correction of problems before times of stress. He further defended the living will process, stating that “if you have a large balance sheet, you owe it to society to reduce the impact of that thing blowing up.”
Increased Fed Regulatory Authority
Donohue pointed out that the Federal Reserve has increased regulatory authority as a result of the Dodd-Frank Act, and asked what advantages and difficulties the new regulatory structure has. Fischer said the financial crisis was a result of the failure of the previous regulatory system, commenting that “the trouble with things that work for a while is that you get sloppy.” He said stronger capital requirements are a result of a need to tighten bank regulation, but that financial regulation cannot be the role of the Fed alone.
Asked about the duplication of regulations, Fischer admitted that more coordination with the other financial regulators could be useful
For more information on this event, please click here
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U.S. Chamber of Commerce Center for Capital Markets Competitiveness
“The Federal Reserve: A Conversation with Vice Chair Stanley Fischer”
Friday, July 17, 2015
Key Topics & Takeaways
- Stress Tests and Living Wills: Fischer said stress tests are a positive development because they allow time for the correction of problems before times of stress. He further defended the living will process, stating that “if you have a large balance sheet, you owe it to society to reduce the impact of that thing blowing up.”
- Fed Regulatory Authority: Fischer said the financial crisis was a result of the failure of the previous regulatory system, commenting that “the trouble with things that work for a while is that you get sloppy.” He said stronger capital requirements are a result of a need to tighten bank regulation, but that financial regulation cannot be the role of the Fed alone. Asked about the duplication of regulations, Fischer admitted that more coordination with the other financial regulators could be useful.
Panelists
- Thomas J. Donohue, President, U.S. Chamber of Commerce
- Stanley Fischer, Vice Chair, Federal Reserve Board of Governors
Federal Reserve Transparency
Federal Reserve Vice Chair Stanley Fischer explained that the Federal Reserve’s independence in monetary policy is critical because central banks are focused on the long-term, rather than “looking at doing something for a year.” He stated that a central bank that is not independent could be used for the purposes of government finance, which “often gets out of control.” However, he also insisted that the Federal Reserve’s dual mandate is set by Congress through legislation and defended the Fed as being the most transparent central bank in the world.
Lender of Last Resort
Thomas Donohue, President of the U.S. Chamber of Commerce, asked if the Fed has as much power to act in times of crisis as it should Fischer answered that panics are very difficult to deal with and that central banks have to act to stop them. He emphasized the role the Federal Reserve serves as lender of last resort, and noted that the financial crisis saw the Fed act as a “market maker of last resort.” Fischer stressed that the Fed’s emergency lending powers are important and warned against losing any such tools that could be useful in a crisis.
Too-Big-To-Fail
Donohue asked how the problem of “too big to fail” banks can be avoided while still promoting economic growth. Fischer answered that banks must generate capital and increase capital capacity to deal with losses so that there is less need for a government bailout. He noted that while the government does not want to encourage banks to make loans “they know will go bad,” but that regulation should not restrict them from lending altogether.
Fischer said stress tests are a positive development because they allow time for the correction of problems before times of stress. He further defended the living will process, stating that “if you have a large balance sheet, you owe it to society to reduce the impact of that thing blowing up.”
Increased Fed Regulatory Authority
Donohue pointed out that the Federal Reserve has increased regulatory authority as a result of the Dodd-Frank Act, and asked what advantages and difficulties the new regulatory structure has. Fischer said the financial crisis was a result of the failure of the previous regulatory system, commenting that “the trouble with things that work for a while is that you get sloppy.” He said stronger capital requirements are a result of a need to tighten bank regulation, but that financial regulation cannot be the role of the Fed alone.
Asked about the duplication of regulations, Fischer admitted that more coordination with the other financial regulators could be useful
For more information on this event, please click here