Fischer urges Congress to expand Fed's mandate

  • New York Times
  • July 10, 2014 - 9:24 PM

Stanley Fischer, the Federal Reserve’s new vice chairman, said Thursday that Congress should consider making financial stability an explicit priority of the central bank and other financial regulators.

The Fed, which has operated since the 1970s under a dual mandate to control inflation and maximize employment, has greatly increased its focus on the health of financial markets since the 2008-09 financial crisis. Fischer said a mandate could reinforce that shift and “contribute to increasing financial and economic stability.”

Fischer, in his first ­public remarks since the Senate confirmed him last month, said the government has made “significant progress” in improving financial regulations since 2008, but he cautioned that important tasks remain incomplete, like ensuring that large banks can be dismantled safely if they fail. He addressed a meeting of the National Bureau of Economic Research, in Cambridge, Mass.

Fischer described stronger capital rules, which limit ­borrowing by banks, as the area of clearest improvement, saying that they have reduced the risk of bank failures. But he raised doubts that regulations will be able to prevent future asset bubbles. He said the Bank of Israel under his leadership had used such tools with limited success to restrain real estate investment.

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