Long experience, in the United States and in other advanced economies, has demonstrated that monetary policy is most successful when decisions are rendered independent of influence by elected officials.
Jerome PowellRead
It is worth noting that 'too big to fail' is not simply about size. A big institution is 'too big' when there is an expectation that government will do whatever it takes to rescue that institution from failure, thus bestowing an effective risk premium subsidy. Reforms to end 'too big to fail' must address the causes of this expectation.
Interpretation
What this quote means
The concept of 'too big to fail' suggests that some institutions are protected from failure due to government intervention, necessitating reforms to change this expectation.
Jerome Powell emphasizes that the term 'too big to fail' goes beyond just the size of an institution; it reflects the belief that the government will intervene in crises to save certain large institutions, which creates a risk premium. To effectively address this issue, there must be reforms that tackle the fundamental reasons why this belief exists, ensuring that all institutions are held accountable for their risks and failures.
Themes
Too Big To FailGovernment InterventionFinancial ReformRisk PremiumInstitutionEconomics
In practice
Example use cases
This quote can be used in a financial seminar discussing the implications of government policies on large institutions.
More from Jerome Powell
All quotes →While the move to central clearing has made the system safer, we need to make sure that the central counterparties have the resources and risk-management practices to withstand plausible but severe shocks.
Jerome PowellRead
I am unable to think of any critical, complex human activity that could be safely reduced to a simple summary equation.
Jerome PowellRead
Long-term economic growth depends mainly on nonmonetary factors such as population growth and workforce participation, the skills and aptitudes of our workforce, the tools at their disposal, and the pace of technological advance. Fiscal and regulatory policies can have important effects on these factors.
Jerome PowellRead
There is no risk-free path for monetary policy.
Jerome PowellRead
My own experience is that the best outcomes are reached when opposing viewpoints are clearly and strongly presented before decisions are made.
Jerome PowellRead
Similar quotes
We've used up a lot of bullets. And we talk about stimulus. But the truth is, we're running a federal deficit that's 9 percent of GDP. That is stimulative as all get out. It's more stimulative than any policy we've followed since World War II.
Warren BuffettRead
When inequality gets too extreme, then it becomes useless for growth, and it can even become bad because it tends to lead to high perpetuation of inequality over time and low mobility.
Thomas PikettyRead
In a very weak economy, when you say 'cut government spending,' what you mean is you're laying off school teachers and you're de-funding various programs that put money into the economy. This means you have more unemployed people that then draw unemployment benefits and don't pay taxes.
Fareed ZakariaRead
When money is controlled by a few it gives that few an undue power and control over labor and the resources of the country. Labor will have its best return when the laborer can control its disposal.
Leland StanfordRead
Building new roads and bridges creates jobs. Growing our exports creates jobs. Reforming our outdated tax system and our broken immigration system creates jobs.
Barack ObamaRead
When money is free, the rational lender will keep on lending until there is no one else to lend to.
George SorosRead