Regional President Speech

Public Service That Makes a Difference® Official Monetary and Financial Institutions Forum Fed Week Financial Stability Session By Eric S. Rosengren Friday, June 25, 2021 Virtual Official Monetary and Financial Institutions Forum (OMFIF) Fed Week: Financial Stability session Figures (pdf) Financial stability Watch later Share Our latest information on COVID-19 Privacy - Terms Watch on 5 takeaways from Boston Fed President Eric Rosengren’s June 25, 2021, remarks to the Official Monetary and Financial Institutions Forum 1. Takeaway: Rosengren observed that short-term credit markets have been disrupted in the past two recessions, and significant risks remain. For example, prime money market mutual funds and stablecoins bear attention. Excerpt on money market funds: “The result has been that [prime] money market funds have been a critical feature of the financial crises that we've seen in the last decade, and this is a problem that has yet to be resolved.” Excerpt on stablecoins: “I think there's a financial stability concern that a future crisis could easily be triggered as these become a more important sector of the financial market, unless we start regulating them and making sure that there's actually a lot more […] stability to what is being marketed to the general public as a ‘stable’ coin.” 2. Takeaway: Substantial emergency actions were necessary to support lending during the pandemic, and the economy would benefit from being less dependent on ad hoc measures in crises. Excerpt: “We need a less ad hoc approach to these crises. We need to think more systematically about how we can make sure that credit is available, and not only to the largest institutions, but many of the small- and medium-sized enterprises as well.” 3. Takeaway: A properly implemented Countercyclical Capital Buffer, or CCyB, would help avoid some of these issues. Excerpt: “I think a well-designed CCyB, which is a counter cyclical capital charge, which builds up capital buffers during good times [and] gets released when we have bad economic times, would have made … at least some of those measures less necessary, because it would have been a natural way to provide a lot more capacity for banks to continue to do their lending.” 4. Takeaway: Unfortunately, emergency facilities do well supporting large firms but are challenged somewhat to reach small firms. Without better facilities for small firms, the situation will increase economic concentration. Excerpt: “So, if we continue to have these kind of crises where these kind of interventions are needed, I think ultimately it's going to result in a greater concentration that we want in the U.S. economy, in the corporate sector.” 5. Takeaway: Housing prices have played a role in financial stability problems in the past, so recent housing price trends should be monitored closely by policymakers. Excerpt: “Around the world, banking crises and financial stability periods are frequently tied to real estate... And, so, I think this bears watching as a potential ‘side effect’ that [policymakers] have to be thinking about as we [determine] what appropriate monetary policy is, going forward.” Straight to your inbox: News and insight from the Boston Fed. Sign up to receive the latest speeches from Boston Fed experts, along with our press releases and newsletter. Email Subscribe See our privacy policy collapse all expand all About the Authors Eric S. Rosengren Eric S. Rosengren is President & Chief Executive Officer of the Federal Reserve Bank of Boston. Resources Keywords financial stability , credit , CCyB , emergency lending facilities , housing market , Main Street Lending Program , Money Market Mutual Funds , MMLF Related Content President Rosengren to speak about the economy and current financial conditions Taking Stock of the Economic Recovery and the Opportunities to Bolster Financial Stability President Rosengren to speak about the economy and current financial conditions Six Takeaways from Boston Fed President Eric Rosengren’s April 12 Remarks Monetary, Fiscal, and Financial Stability Policy Tools: Are We Equipped for the Next Recession? Subscribe and listen to the latest #podcast season of Six Hundred Atlantic focusing on #childcare and how it affects the economy: http://www.bit.ly/3wr0VNJ About Us Reserve Bank Services Leadership & Organization Cash Services Doing Business With Us Wholesale Payments Contact Us Careers Visitor Information & Directions 600 Atlantic Avenue Boston, MA 02210-2204 map (617) 973-3000 Get email updates from the BostonFed Terms of Use & Privacy Data Privacy Site Accessibility Feedback © Federal Reserve Bank of Boston 

Eric Rosengren (2021, June 24). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_20210625_eric_rosengren

@misc{wtfs_regional_speeche_20210625_eric_rosengren,
  author = {Eric Rosengren},
  title = {Regional President Speech},
  year = {2021},
  month = {Jun},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_20210625_eric_rosengren},
  note = {Retrieved via When the Fed Speaks corpus}
}