Word: systemically
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Faculty Council member Harry R. Lewis ’68 agreed that the new system was successful...
...gained steam and popularity over the last few weeks, politicians are predictably spewing populist demagoguery and wasting an opportunity to implement intelligent regulations. Congress must keep the unintended effects of their measures in mind as they finalize the legislative details on trading derivatives and supervising the Federal Reserve System...
...monitored and regulated, and the legislation had been moving in this direction. However, Arkansas Senator Blanche Lincoln has now introduced an amendment to the legislation that will cause banks to spin off their derivatives trading businesses entirely. Although this measure seems like it will decrease risk in the financial system, in reality, it will only transfer the risk to murkier and less-visible facets of the financial world...
Though the amendment has been narrowed in order to ensure that it will not aim to politically influence the creation and setting of monetary policy, it still interferes with the necessity of an independent Federal Reserve with the power to act in times of crisis. In the financial system, a bank does not need actually to be running out of money for a bank run to occur; there only needs to be the impression that the bank might be running out of money. This is why all of the major banks only received Troubled Asset Relief Program funds in concert...
...even greater scale, this amendment violates one of the basic foundational principles of our central banking system: Our economy hinges on the trust that we place in the Federal Reserve to look out for the best interests of the economy at large, independent of any political influence whatsoever. Through administrations that might be victim to political pressures of all types, the Federal Reserve does what is right for the stability of our economy, be it the case of former Chairman Paul Volcker’s raising of interest rates to historically high levels in order to cut inflation...