Banking Expert from 2008 Crisis Says Low Interest Rates Make Banks Vulnerable and Americans Poorer
By Joy Wiltermuth
Ignoring the problem never makes sense, Petrou says
Wall Street better be careful what it wishes for. Karen Shaw Petrou, a prominent voice on financial regulation for decades, wants the Federal Reserve to know it will be making a big mistake if it listens to Wall Street and cuts interest rates later this month. “I read everyone saying the Fed should drop rates, because that will improve the economy. That it is good for employment. Well, it isn’t,” Petrou told MarketWatch in an interview. The promise of low central bank rates has helped lift U.S. stocks to all-time-highs, with the Dow Jones Industrial Average DJIA, +0.71% and S&P 500 SPX, +0.33% this week reaching new records as investors flee the near $13 trillion pile of global debt currently offering negative yield, including recently even some corporate bonds. But the Fed’s “lower for longer” interest rate policy also ratchets up risks for banks, warned Petrou, the co-founder of Washington, D.C.-based Federal Financial Analytics Inc., a banking advisory firm to lawmakers, central banks and industry groups since 1985.