Policymakers should resist the urge to “overreact” in the wake of crisis, as they did following the 2008 financial crisis, Federal Reserve Governor Stephen Miran said today.
During a speech at a Washington, D.C., conference, Miran outlined five principles that will guide his approach to bank regulation. Among them, he stressed the need not to overregulate following a market disruption, as he said happened following the 2008 crisis.
“The signs of this overreach are clear: Many traditional banking activities have migrated away from the regulated banking sector partly because burdensome rules have made provision of these services too costly or otherwise difficult for banks to provide,” Miran said. “While I have no bias against nonbank financial companies, credit allocation should be driven by market forces, not regulatory arbitrage.”
His other guiding principles are to consider the potential costs and benefits of any regulation, that the Fed should aim for the smallest footprint possible, that regulatory transparency has many benefits, and to keep an open mind.
“Good new ideas can come from any direction; the regulatory process guarantees that the public can provide input, but regulators listen to different degrees,” he said. “I will be listening.”
