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November 7, 2022

The Federal Reserve’s Late Friday Admission that its Policies are Risking Financial Stability Does Not Go Far Enough

WASHINGTON, D.C.—Dennis Kelleher, Co-Founder, President, and CEO of Better Markets, issued this statement in response to the Federal Reserve’s release of its semi-annual Financial Stability Report last Friday:

“The Federal Reserve’s latest semi-annual Financial Stability Report released late on Friday finally admitted something we have been saying for a long time – its policies are causing risks to financial stability, the economy, and the livelihoods of all Americans.  The result of the Fed’s past and present actions will almost assuredly result in a recession ranging in severity from a soft landing to a catastrophic downturn.  Regardless, a recession will likely throw millions of Americans out of work, lower their standards of living, suppress their wages, deplete their savings, and otherwise inflict pain on Main Street, as even Fed Chair Powell has stated.

“That’s why the Fed’s admission of its role in contributing to all this was far too narrow and incomplete.  Until the Fed admits and understands the depth and breadth of risks its policies have unleashed, its ability to properly address those risks will remain significantly impaired.  That is particularly true given the array of multiple, simultaneous economic, financial, and geopolitical shocks within which its policies were announced and implemented.

“Although the Fed’s Financial Stability Report focused on the obvious risk to financial markets of ‘higher-than-expected interest rates,’ the risks are much larger and stem not only from the current massive policy U-turn but also from the Fed’s indiscriminate, extended, and clearly excessive flood of liquidity into financial markets and de facto sub-zero rates in response to the COVID-19 pandemic. Remarkably, those policies ended only in March of this year – two full years after the onset of the pandemic-caused market stress and the flood of fiscal liquidity in response.  Those Fed actions resulted in significantly mispriced risk in financial markets, a huge buildup of debt based on that mispriced risk, the proliferation of so-called ‘zombie’ companies, and increased moral hazard and risk-taking.

“With Fed policies now moving quickly and significantly in the opposite direction, these market effects caused by the Fed’s policies threaten to unwind rapidly and dramatically and cause defaults and disruptions in financial markets as well as the economy at large. The Fed must admit its key role in causing these multiple, historic risks and tell the American people the full story of the risks its policies have created.  That requires a comprehensive, data-driven analysis that includes granular details of its actions and the implications. Without this, the Fed cannot properly address the risks that have materialized, in part, due to its policies.

“Finally, the Fed must stop its indefensible practice of releasing key information late on Friday afternoons, as it did with the Financial Stability Report, clearly with the intent of minimizing media attention and the possibility of public scrutiny, oversight, and accountability.  The Fed should be embarrassed by its practice, which is an insult to the American people and damages its credibility.”


Better Markets is a non-profit, non-partisan, and independent organization founded to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit


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