viernes, 19 de julio de 2013

viernes, julio 19, 2013
 
July 17, 2013, 3:15 PM ET
 
How Far Should Fed Go to Pop Potential Bubbles?
 
ByAlan Zibel
 
 
How far should regulators go to pop emerging bubbles?

Federal Reserve governor Sarah Bloom Raskin, citing the recent housing boom and bust as evidence, said U.S. regulators should use a wide range of tools to combat bubbles and not rely solely on stricter capital requirements.

Ms. Raskin, speaking at an event in Washington, said officials should “lean against emerging asset bubbles” through regulatory tools such as loan-underwriting restrictions and increased margin requirements on short-term funding markets.

For example, Ms. Raskin said, regulators could impose down payment requirements that would automatically increase during buoyant times and relax when a bust arrives.

Still, the Fed official faces questions about whether the Fed itself is inflating such a bubble.
Asked by an audience member whether the Fed should be acting more quickly to limit bubbles by raising interest rates from near-zero levels, Ms. Raskin said the benefits of the Fed’s easy-money policies currently outweigh the costs and risks.

“Should there be a point at which these type of costs exceed the benefits that the low-interest rate environment is providing generally to the economy, then I would argue it needs to be reevaluated,” Ms. Raskin said. The future course of Fed policymakers’ decision making is “highly data dependent,” and will vary based on how the economy performs.

Her remarks came after the Fed and other banking regulators earlier this month proposed tougher requirements for banks’ capital cushions than mandated by an international agreement.

Ms. Raskin praised that proposal, saying it will “build resilience to whatever shocks may come, and will reduce the potential for asset bubbles and excessive credit growth,” as well as the potential for future financial crises.

Nevertheless, Ms. Raskin argued that stricter capital isn’t enough and said regulators also need to work together to cooperate so they can spot areas of emerging risk and prevent bubbles from happening.

Examiners of any financial institution must be able to spot early risks and articulate to institutions’ management and boards of directors why such risks are, in fact, risks,” she said. “And the identification of risks should be true risks, and not just new business practices that examiners have never seen before.”

After months of work, the Fed and other regulators finalized capital regulations, intended to meet international obligations and implement the 2010 Dodd-Frank financial overhaul law. They then went beyond those requirements, proposing that eight big bank-holding companies increase their so-called leverage ratios to 5%. Their FDIC-insured bank subsidiaries would have to increase them to 6%–well above the 3% agreed upon by global regulators.

Ms. Raskin, a former Maryland bank regulator, joined a chorus of voices from inside the Fed and other agencies suggesting regulators may be willing to push larger and riskier banks to hold more capital than was envisioned when the capital framework was proposed last year.

Fed governor Daniel Tarullo, the Fed’s top voice on regulatory matters, has expressed similar concerns on the risk of short-term funding markets, telling lawmakers earlier this month that securities-financing deals pose a risk to financial markets. Regulators have repeatedly raised concerns about the volatility and risk of runs inherent in short-term funding, as evidenced by the rapid freeze in liquidity at the height of the 2008 financial crisis.

 
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