Federal Reserve points to risks in the current economy
Justin Ho
We talk a lot about the Federal Reserve and its role as a guardian of interest rates, but a big part of the Fed’s mandate is keeping the larger financial system stable. This week, the central bank put out a report looking at that stability. It found that even though coronavirus vaccinations are rolling out and the economy’s set to rebound this year, there are still plenty of risks lurking out there, which the Fed is keeping an eye on…“The more debt they have in relation to their capacity to repay it, the less it takes to throw them into the ditch,” said Karen Petrou, managing partner at Federal Financial Analytics. The Fed mentioned a hedge fund called Archegos Capital Management. It made big bets on stocks using money it borrowed from banks. And this year, it went bust after some of its bets went bad. Petrou said this was just one small hedge fund. But, “even relatively small, tiny ones can leave big, big holes in big banks. And that sobered up the Fed.” Listen here: https://www.marketplace.org/2021/05/07/federal-reserve-points-to-risks-in-the-current-economy/