The President of the New York Fed on Lessons Learned from the Financial CrisisOn June 26, William C. Dudley, the President and CEO of the New York Fed, spoke at the annual Bank for International Settlements conference in Basel, Switzerland. His topic was lessons learned from the financial crisis we've experienced over the past two years.
Since Dudley's remarks, as posted at the New York Fed website, are clearly organized, and only about 4½ pages in length, I'll simply recommend that you read through them. To whet your appetite, here, slightly edited, are the summary recommendations with which Dudley concludes:
- Do a better job understanding interconnectedness. This means changing how we oversee and supervise financial intermediaries.
- Change the system so that it is more self-dampening.
- Improve incentives.
- Increase transparency.
- Develop additional policy instruments. For example, we might give a systemic risk regulator the authority to establish overall leverage limits, or collateral and collateral haircut requirements, across the system. This would give the financial authorities the ability to limit leverage and more directly influence risk premia, and this might prove useful in limiting the size of future asset bubbles.