Caught in CCAR’s Cross-Fire

By Karen Shaw Petrou

  • CCAR now tries to make big banks a shadow U.S. central bank.
  • Result: more systemic risk and still less economic inequality.

How do you make the financial system less stable and increase U.S. economic inequality at the same time?  It’s not easy, but if you’re the Fed, then you accomplish this frightening feat by toughening up the annual CCAR stress test for the biggest banks without an eye to its systemic or market impact.  Stress testing is fine – indeed an important addition to the post-crisis supervisory arsenal.  But, CCAR itself is founded on two flawed premises:  big BHCs are the heart of financial stability and nothing the central banks does adversely affects economic inequality.  Continue reading “Caught in CCAR’s Cross-Fire”

Why “Full” Employment is an Empty Promise

By Karen Shaw Petrou

In her speech on September 26, FRB Gov. Brainard deploys a lot of data to raise, but then duck, what I think is the most critical question about post-crisis monetary policy:  Is U.S. employment really “full” enough to justify wider wealth inequality that is in part the Fed’s fault?  Chair Yellen and others defend quantitative easing (QE) and ultra-low rates on grounds that U.S. “full” employment will eventually be matched by growth, consumption, and resilient, robust recovery.
Continue reading “Why “Full” Employment is an Empty Promise”