FT: Fed’s vice-chair says moves to unwind regulations are dangerous

One of the Federal Reserve’s top policymakers has attacked attempts to reverse the post-crisis drive for tougher regulation, calling efforts to loosen constraints on banks “dangerous and extremely short-sighted”.

Stanley Fischer, the vice-chairman of the Fed’s board of governors, said in an interview with the Financial Times that 10 years after the crisis there are troubling signs of a drive to return to the status quo that preceded it. While he endorsed efforts to ease up on small banks, he said political pressure in Washington to curtail regulatory burdens on large institutions was very hazardous.

Fischer criticized calls to ease up on stress testing, saying pressure to loosen standards on big banks was “very, very dangerous”. He argued that the US had yet to deal with the so-called shadow banking system, which operates outside the mainstream lenders, calling this a “terrible mistake”. And he decried attacks on global bodies such as the Financial Stability Board, which some Republican politicians say has been imposing burdensome regulations on the US, saying “I am worried that the US political system may be taking us in a direction that is very dangerous”.

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