Chris Dodd‘s financial regulatory reform plan goes too far in my view in stripping away powers from the Fed. It makes sense to take away the Fed’s ability to bail out individual companies under 13.3 once there is a special resolution entity in place to manage financial failures. But taking away the Fed’s banking supervision role risks robbing it of an information flow vital to deal with financial stability threats. And giving systemic risk powers to a new agency is a recipe for confusion or worse.
Why? Because an economy with a systemic risk or macroprudential regulator and a separate central bank would be like a car with two drivers. Read more
A single banking regulator for the US has just been proposed by a key Senate committee. The suggestion is not new. A single regulator was suggested in 1993 by then treasury secretary Lloyd Bentsen, following a wave of thrift and bank failures. The proposal, to consolidate all four federal banking regulation and supervision agencies, went nowhere.
Sixteen years later, the Obama administration proposed to reduce the four agencies to three, by eliminating the Office of Thrift Supervision through consolidation with the Office of the Comptroller of the Currency. But critics argued this would “allow financial groups to continue to shop for the weakest regulator”. Read more
Janet Yellen is still focused on deflation risk (or excess disinflation risk) and the need to bring down unemployment. In her analysis today, spare capacity and the decline in unit labour costs are exerting a strong downdraft on the overall inflation rate and the risk is that core inflation - which is already below target – will decline further from here.
No great surprise, coming from the committee’s leading dove. But no vote here for early tightening!
Dennis Lockhart meanwhile sees a “relatively subdued pace of growth… Read more
Banks face higher refinancing costs as $7,000bn of short-term debt is due to mature in the next three years. The IEA is accused of overstating energy reserves and the chief economist of the World Bank says China should not be forced to allow appreciation of the renminbi Read more
Economics headlines from around the web Read more
Economics headlines from the FT Read more