Our Baffled, Befuddled Central Bank
After SVB failed, Jay Powell told his monthly press conference that he found this “baffling” even though the Fed was the lead bank supervisor and the only one charged with its BHC’s oversight. At Wednesday’s presser, Mr. Powell took a different, but still-indefensible tack avoiding responsibility for a looming threat by stoutly denying his ability to do anything about nonbank financial-stability risk. However, the Board has an express mandate under the Dodd-Frank Act to address it. To be sure, the Fed does not have direct regulatory authority over nonbanks as it now remembers it did over SVB. But to say that the Fed’s only power is over banks as he Wednesday did is at best befuddled. A baffled, befuddled central bank is a national – indeed global – hazard.