Kane Davis Cooper

Fed’s Stanley Fischer berates attempts to roll back regulations

Kane Davis Cooper – Economist and vice chair of the U.S. Federal Reserve System, Stanley Fischer, has spoken out on attempts to reverse regulations and unwind bank limitations put in place after the global financial crisis as “dangerous and extremely short-sighted”.

In an interview with a top British financial newspaper he said that a decade after the troubles, indications of a move to unwind the lessons learned at that time are extremely unwise.

While he agreed with easing up on smaller banks, he said the political will to decrease regulatory measure for big institutions was extremely risky.

Conservative politicians have been advocating a weakening of some capital and liquidity restrictions on financial institutions, contending that they are obstructing those companies’ capacity to lend.

Mr Fischer slated appeals to lessen stress testing, saying easing standards on big banks was “very, very dangerous”. He voiced his concern that the US had not yet handled the so-called shadow banking system, which works independent of the major lenders, calling it a “terrible mistake”.

He also denounced criticism of world bodies such as the Financial Stability Board, which some American politicians say has been inflicting onerous regulations on the US, further stating that “I am worried that the US political system may be taking us in a direction that is very dangerous”.

Mr Fischer said: “It took almost 80 years after 1930 to have another financial crisis that could have been of that magnitude. And now after 10 years everybody wants to go back to a status quo before the great financial crisis. And I find that really, extremely dangerous and extremely short-sighted”.

“One can understand the political dynamics of this thing, but one cannot understand why grown intelligent people reach the conclusion that [you should] get rid of all the things you have put in place in the last 10 years”.

Mr Fischer’s comments come as central bankers get ready for their yearly get together in Jackson Hole, Wyoming, later this month.