We don’t know what you’ve heard, but the markets and the economy theoretically underlying them have been, well, a bit stressed lately. Goldman Sachs may not think it’s a big deal, and neither by some measures do the markets themselves, but the Federal Reserve certainly does, pledging a brutal, unrelentingly harsh war on inflation, whatever the casualties and costs may be.
“It is very much our view, and my view, that we need to act now forthrightly, strongly, as we have been doing, and we need to keep at it until the job is done,” Mr. Powell said Thursday morning at a virtual conference hosted by the Cato Institute.
“We are in this for as long as it takes to get inflation down,” said Fed Vice Chairwoman Lael Brainard in a speech prepared for delivery at a banking conference in New York on Wednesday.
And that, undoubtedly, means another three-quarter-point rate hike a week-and-a-half from now, like the one the European Central Bank just made. Which means more stress, probably. The sort of stress that another Fed board member thinks needs to be, you know, tested.
Fed Vice Chairman Michael Barr…. suggested he was looking at ways to beef up stress tests, the value of which some critics say has eroded over time, becoming less stressful for banks. “The stress tests need to continue to evolve,” Mr. Barr said. “They’re supposed to be stressful. They’re supposed to be tough. And I want to make sure that they are that way.”
He may not be the Sarah Bloom Raskin or Saule Omarova that progressives hoped for, but Barr may just be a fitting successor to the Torquemada of Stress Tests. And he may also not be as far from the Raskin-Omarova mold as Wall Street hoped, either.
Mr. Barr said he aims to evaluate how the Fed reviews proposed bank tie-ups and to assess “where we can do better,” speaking at an event hosted by the Brookings Institution, a Washington think tank…. “These risks may be difficult to assess, but this consideration is critical to assess how we are performing merger analysis and where we can do better,” Mr. Barr said Wednesday….
He spoke about so-called living wills, or plans for banks to wind themselves down in a crisis without a government bailout. Mr. Barr said regulators need to continue to analyze whether firms are taking “all appropriate steps to limit the costs to society of their potential failure.” He also warned about the so-called resolvability of some larger regional banks that have grown in size and in importance to the financial system.
Fed’s Top Banking Regulator Signals Tougher Merger Reviews, ‘Living Wills’ [WSJ]
Fed’s Powell Affirms Need to Act Strongly to Fight Inflation [WSJ]
Lael Brainard Says Fed Rate Rises Will Bring Down Inflation [WSJ]
ECB Raises Interest Rates by Historic 0.75 Point as Europe Stares at Recession [WSJ]
Market bracing for another three-quarter point hike from the Fed this month [CNBC]
The Case for a Soft Landing: How High Inflation Could End Without Recession [WSJ]
Investors Are Forgoing Crash Insurance in Options Market [WSJ]
For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.