WASHINGTON--The Federal Reserve is elevating its postcrisis efforts to monitor potential threats to financial stability, creating a high-level committee led by the central bank’s No. 2 official.
The committee, which includes Fed Vice Chairman Stanley Fischer and governors Daniel Tarullo and Lael Brainard, will play a role monitoring the financial system for emerging problems such as asset bubbles and analyzing how the central bank should respond.
The committee’s makeup suggests it could be a powerful voice within the Fed on financial stability issues.
The Fed and other regulators have been wrestling since the 2008 crisis with how best to keep tabs on financial markets to ensure certain patterns and practices don’t turn problematic if left unchecked.
Among the many postcrisis criticisms was that regulators didn’t spot or respond to problems quickly enough, failing to address deteriorating underwriting standards and missing the exposure of big banks to the asset-backed commercial paper market, which collapsed under the weight of investments in troubled mortgage debt.
The effort to spot potential risks to financial stability has spawned a growing list of new entities to watch over markets, including a panel of top regulators, led by the Treasury Secretary, called the Financial Stability Oversight Council and the Office of Financial Research, housed at Treasury, which was created to assist FSOC by collecting and analyzing financial system data.
The Fed, under former Fed Chairman Ben Bernanke, created an Office of Financial Stability Policy and Research in 2010. Led by longtime Fed economist Nellie Liang, the office brings together economists, bank supervisors and others to help locate and address financial system weakness.
Mr. Bernanke created the office as part of a broader project he spearheaded to refocus the central bank on protecting the financial system.
marketwatch.com
The committee, which includes Fed Vice Chairman Stanley Fischer and governors Daniel Tarullo and Lael Brainard, will play a role monitoring the financial system for emerging problems such as asset bubbles and analyzing how the central bank should respond.
The committee’s makeup suggests it could be a powerful voice within the Fed on financial stability issues.
The Fed and other regulators have been wrestling since the 2008 crisis with how best to keep tabs on financial markets to ensure certain patterns and practices don’t turn problematic if left unchecked.
Among the many postcrisis criticisms was that regulators didn’t spot or respond to problems quickly enough, failing to address deteriorating underwriting standards and missing the exposure of big banks to the asset-backed commercial paper market, which collapsed under the weight of investments in troubled mortgage debt.
The effort to spot potential risks to financial stability has spawned a growing list of new entities to watch over markets, including a panel of top regulators, led by the Treasury Secretary, called the Financial Stability Oversight Council and the Office of Financial Research, housed at Treasury, which was created to assist FSOC by collecting and analyzing financial system data.
The Fed, under former Fed Chairman Ben Bernanke, created an Office of Financial Stability Policy and Research in 2010. Led by longtime Fed economist Nellie Liang, the office brings together economists, bank supervisors and others to help locate and address financial system weakness.
Mr. Bernanke created the office as part of a broader project he spearheaded to refocus the central bank on protecting the financial system.
marketwatch.com
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