WASHINGTON–Fed Chairman Jerome “Jay” Powell said the central bank has not forgotten the lessons learned during the financial crisis of a decade ago, but that it also isn’t seeking to over-react.
As part of an interview on the radio program “Marketplace” with host Kai Ryssdal, Powell said the “pillars” of regulatory powers–such as stress tests, risk management and higher capital requirements for banks–remain in place and are “important.”
“But we’re going to try make sure that the things that we’ve done have been right and efficient too,” Powell said, noting the financial crisis exposed numerous shortcomings. “So what the big storm showed was a whole bunch of weaknesses in the way we supervise banks, in payment utilities, in the financial markets broadly.”
Powell suggested many of those exposed weaknesses have been addressed and that he and the Fed remain concerned that the taxpayer not be put at such risk ever again.
Referring to those “pillars,” Powell said, “We’re going to strengthen them. We’re going to make them more transparent, more sustainable. So we’re not looking to go back to the pre-crisis era, but we want the strongest, toughest regulation and supervision to be aimed at the largest, most systemically important financial institutions.”
Echoing demands often heard from credit union trade groups and those representing community banks, Powell said there is room for “tailoring” of rules for smaller institutions.
“We’re really going through that quite carefully to make sure that we didn’t overdo it,” he said.