Too-Big-To-Fail May be Reviewed Under Trump, Fed’s Kashkari Saysby and
‘People on both sides of the aisle’ interested in new rules
Minneapolis Fed chief had no contact with Trump team on issue
This month’s elections in the U.S. paved the way for a review of regulation for financial institutions whose failure would wreak havoc in the global markets, said Federal Reserve Bank of Minneapolis President Neel Kashkari.
“With the new administration and the new Congress there is a chance to take a fresh look" at the issue, Kashkari, 43, said in a Bloomberg Television interview Thursday. “This is a non-partisan issue, there are people on both sides of the aisle who think we really need to address too-big-to-fail.”
Kashkari proposed this week a series of new rules for banks and non-bank lenders centering on a significant increase of the capital cushion they must hold to protect against losses in a crisis. The plan also calls on the U.S. Treasury to determine which banks are “too big to fail” and face higher capital requirements.
“The biggest banks are bigger than they were before the crisis,” Kashkari said in the interview with Jonathan Ferro and David Westin. He added he has had “no contact” on the issue with President-elect Donald Trump’s transition team.
Kashkari took over the top job at the Minneapolis Fed in January and will hold a vote on the U.S. central bank’s rate-setting Federal Open Market Committee next year.
The Minneapolis Fed chief said in an interview earlier this week that he hasn’t yet seen indications that the U.S. economy will break out of the slow-growth paradigm of the last few years. He said any change in the outlook based on the election will be contingent on observing actual steps taken by Trump and the new Congress, where his Republican party retained control in the Nov. 8 election.
In the interview with Bloomberg Television on Thursday, he said he has “no idea” of what the new administration’s fiscal stimulus will be.
Regarding the Fed’s monetary policy, Kashkari said: “I find that we get ourselves into trouble when we make a bunch of short-term predictions, because people get really upset when those short-term predictions don’t come true.”
“I think we should stay out of the prediction business, focus on the data and the analytics business and everybody will be better off,” he said.