Courtesy of Pam Martens
Lael Brainard, Member of the Federal Reserve Board of Governors
There was an outcry in Washington yesterday over the latest move by the Federal Reserve. While the New York Fed is pumping hundreds of billions of dollars each week into Wall Street because of a liquidity crisis, the Washington, D.C. based central bank, the Federal Reserve Board of Governors, just changed its rules to lessen liquidity buffers at banks and rolled back other critical safeguards. The response from Gregg Gelzinis, policy analyst for Economic Policy at the Center for American Progress was swift. He released the following statement:
“Today, the Federal Reserve eroded several critical banking protections put in place following the 2007-2008 financial crisis, further putting the economy at risk. The final rule threatens the safety and soundness of the banking system from multiple angles. Reducing the stringency of bank capital requirements, liquidity rules, and stress testing makes large bank failures more likely—while watering down living wills requirements magnifies the economic devastation caused by such failures.
“The beneficiaries of these rollbacks are not small firms. Domestic regional banks, the U.S. operations of foreign megabanks, and even Wall Street banks all enjoy various levels of deregulation in this package…
“When unchecked risk-taking leads to instability in the financial system, the pain will be felt by working families and taxpayers.”
Federal Reserve Board Governor Lael Brainard strongly opposed the rule changes and released a detailed statement which noted the following:
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