Washington, DC – Today, the Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity held its first hearing to examine the Federal Reserve’s monetary policy and its impact on Americans.
As Chair of the Task Force, Congressman Frank D. Lucas (OK-03) had the opportunity to question witnesses on a variety of topics, including the Fed’s calculation of the supplementary leverage ratio (SLR).
HIGHLIGHTED QUOTES:
Mr. Lucas: “Mr. Wang, you include in your written testimony a discussion of the supplementary leverage ratio and the Fed’s regulatory relief during the pandemic. You write that the Fed’s current regulations on the SLR disincentivize low risk activities like holding Treasuries. Given the stress we’ve seen on the Treasury market, do you think the Fed should reevaluate the SLR?”
Mr. Joseph Wang, Monetary Macro LLC: “I absolutely agree. The SLR is basically a regulation that makes banks hold capital based on the size of the balance sheet without regard to the riskiness of their assets. When you’re looking at assets, for example, like reserves which are very liquid and have zero credit risk, or Treasury securities which have no credit risk and are very liquid, it does not make sense to have to hold capital against those. And looking across the world there are also other countries who have regulations that don’t require reserves in the SLR. So, I think some adjustment there would significantly increase the capacity of the bank system and improve the functioning of the Treasury market.”
Click here or on the image above to watch the Q&A.
BACKGROUND:
The Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity was created at the beginning of the 119th Congress.
The Task Force is charged with examining issues related to monetary policy, the fundamental role that U.S. Treasury debt plays in the economy, and the resilience of the Treasury market. The Task Force will also examine the Federal Reserve Act and how economic growth and price stability affect the financial wellbeing of all Americans.
You can find more information on the Task Force here.
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