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
The best and most sustainable love story for markets is one based on a healthy and dynamic real economy that creates jobs and opportunities for many more people.
Mohamed El-ErianRead
If I care about poverty, I have to care a lot about investments in the private sector. The private sector creates the vast majority of jobs in the world, and social protection only goes so far.
Jim Yong KimRead
I am in favor of high wages and agree that the higher the wages, the stronger the evidence of prosperity, provided (and that is the important point) they are so naturally, by the effectiveness of industry, and not in consequence of an inflated currency or any artificial regulation.
John C. CalhounRead
It is credit that matters, not money (in other words, monetarism is a false ideology).
George SorosRead
There are severe limits to the good that the government can do for the economy, but there are almost no limits to the harm it can do.
Milton FriedmanRead
A global economy is characterized not only by the free movement of goods and services but, more important, by the free movement of ideas and of capital.
George SorosRead