Powell Provides Clue to New SLR, CBDC
At today’s HFSC hearing on pandemic-relief programs, Members asked also about key financial-policy questions. Although Chairman Powell initially reiterated only that a new SLR proposal would be forthcoming in the near term, he also said that the Fed is seeking to revise the requirement so leverage does not again become a big-bank binding constraint. Doing so would involve extending the exemption at the least for central-bank deposits and almost surely also for Treasury obligations, perhaps going farther also to include certain agency debt. It is thus clear that the new SLR proposal will not only be substantive, but also controversial and, most likely, one issued only by the Federal Reserve, not also the FDIC and OCC. Expanding on his CBDC comments yesterday, Mr. Powell said and Secretary Yellen seconded that a U.S. CBDC would not provide anonymity in a manner akin to crypto currency or supplant bank deposit-taking. However, the “two-track” system he mentioned might nonetheless compete with it as a recent Fed paper suggested. As noted earlier today, the Fed chairman also refuted GOP suggestions that climate-risk actions are outside its mandate. Secretary Yellen also said that FSOC would play an active climate-risk role, but each also made it clear that mandatory actions or stress testing are a long way off due to the ongoing data uncertainties Gov. Brainard also discussed earlier today. Ms. Yellen also echoed Vice Chairman Quarles, calling for federal legislation to facilitate the LIBOR transition.
