Federal Reserve press conference, 2021-03-17 — Chair Jerome Powell

Question (Victoria Guida, Politico): Hi, Chair Powell. I wanted to ask about the supplementary leverage ratio. You know, there’s been a lot of talk about what you all are going to do this month, which—I’m happy to hear an update if you have one. But just sort of more broadly, do you think, long term, that the leverage ratio poses problems for implementing monetary policy at a time when the reserve supply is going to remain large? And, if so, do you think the changes to the leverage ratio, including the SLR, are the way to deal with that problem?
Answer: Victoria, we’ll have something to announce on that in coming days. And I’m not going to expound upon your questions. Why don’t you—why don’t you ask another question if you’d like to? Because, because that one—I’m just going to say that we’ll have something in coming days.

Question (Michael Derby, Wall Street Journal): Thank you for taking my question. I just wanted to get your—an updated view on your sense of your view on financial stability risks and whether or not you see any pockets of excess out in financial markets that concern you, either, you know, specifically to that, that area of the market or as in terms of, like, the threat that it could pose to—propose to the overall economy.
Answer: Sure. So, as you know, financial stability for us is, is a framework. It’s not one thing. It’s not a particular market or a particular asset or anything like that. It’s a framework that we, we have. We report on it semiannually, the Board gets a report on it quarterly, and we monitor every day. And it has—it has four pillars, and those are four key vulnerabilities: asset valuations, debt owed by businesses and households, funding risk, and leverage among financial institutions. Those four things. And I’ll just quickly touch on them. So if you look at asset valuations, you can say that by some measures, some asset valuations are elevated compared to history. I think that’s clear. In terms of households and businesses, households entered the, the crisis in very good shape by historical standards. Leverage in the household sector had been just kind of gradually moving down and down and down since the—since the financial crisis. Now, there was—there was some negative effects on that, people lost their jobs and that sort of thing, but they’ve also gotten a lot of support now. So the damage hasn’t been as, as bad as we thought. Businesses, by the same token, had a high debt load coming in. And—but—and many saw their revenues decline. But there’s—they’ve done so much financing, and there’s a lot of cash on their balance sheet. So nothing in those two sectors really jumps out as really troubling. Short term—I mentioned funding risk as the—as the last one. So we saw, again, in this crisis, breakdowns in parts of the short-term funding markets—came under a tremendous amount of stress. And they’ve been quiet since the spring. And, you know, we shut down our facilities and all of that. But we, we don’t—we don’t feel like we can let the moment pass without just saying again that we—that those—some aspects of the short-term funding markets and, more broadly, nonbank financial intermediation didn’t hold up so well under great stress—under tremendous stress. And we need to go back and look at that. So a very high priority for us as regulators and supervisors is going to be to go back—and this, this will involve all the other regulatory agencies; it does involve all of them as well—and see if we can strengthen those things. So that’s, that’s a—sort of a broader, detailed look.