Fed’s Quarles highlights non-bank financial institutions, Fed intervention as focus areas

Remarks at the Hoover Institution, October 14, 2020

Our discussions have surfaced a number of issues associated with particular types of market participants and mechanisms that may have caused liquidity imbalances and propagated stress. They include: vulnerabilities in money market funds (as I discussed earlier); dealers’ capacity and willingness to intermediate; market structure in the core government bond markets and, potentially, the role of leveraged investors; and fragilities in US dollar cross-border funding.

Bloomberg reports from the following discussion: “It may be that there is a simple macro fact that the Treasury market being so much larger than it was even a few years ago, much larger than it was a decade ago and now really much larger than it was even a few years ago, that the sheer volume there may have outpaced the ability of the private market infrastructure to support stress of any sort there,” Quarles said.

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