MANILA, Philippines – The United States Federal Reserve made a statement that there was an uncertainty regarding the U.S. fiscal policy upon the assumption of Donald Trump in the U.S. presidency. Nevertheless, the Fed will continue to be firm with meeting their targets in creating full employment and making inflation to 2 percent.
The United States Federal Reserve Vice Chair, Mr. Stanley Fischer, declared his views on Saturday during the Warwick Economics Summit. He said that he hoped for capital requirements will not be reduced significantly and he did not expect the Dodd-Frank regulation on financial institutions would not be repealed as a whole.
The vice chair answered a question regarding his thoughts on the current fiscal policies of the United States and he mentioned that uncertainty in the Trump administration is significant. He emphasized as well that the Congress and the administration and works together in deciding fiscal policy. He made it clear that as of the moment, the Federal Reserve focuses to keep the full employment in its country and to make its inflation to 2 percent. They are going to strictly implement the existing laws.
Regarding the Dodd-Frank, he shared during the summit that he initially thought there will be only some adjustments in the regulation. This is because a significant reduction of the capital requirements will consequentially result in a reduction in the safety of the system. Yet, he said that he is hopeful that that will not happen.
The Dodd-Frank financial regulation was passed and became effective in 2010. This was a response made by the legislators during the aftermath of the devastating financial crisis during the years 2008 and 2009. This financial regulation keeps banks to strictly maintain a capital of higher levels. The said regulation prevents further damage to the financial system in the country and also significantly reduces the risk of another crisis.
The action of making adjustments in the Dodd-Frank regulation will likely result in community banks to being less demanding.
The statements Fischer made came a day after Daniel Tarullo, the top bank regulator of the U.S. Federal Reserve declared that he would resign. The resignation would make it easier for the Trump administration in making adjustments in the reforms that were implemented after the financial crisis in 2008.
Last week, the U.S. president ordered to review the major banking rules which were made as a result of the damage caused by the financial crisis back in 2008. This action by the U.S. president drew fire from the Democrats. The banking sector’s stocks gained over the events. This is in view of more loose banking regulations.