On Friday, the Federal Reserve released a chastened assessment of U.S. systemic risk, abandoning longstanding faith in the ability of Fed-regulated banks on their own to ensure financial stability no matter the transformation of U.S. finance into an increasingly nonbank sector. Forced to come to terms with nonbank systemic risk due to all the facilities it was forced to construct, the Fed still thinks it can handle the financial sectors it thinks essential to systemic stability.
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