Journal Article

The Pursuit of Financial Stability: Essays from the Federal Reserve Bank of Richmond Annual Reports

Abstract: These essays reflect much of the thinking we have done, some of it well before the financial crisis, on the sources of financial instability and the means by which public policy can promote stability. A unifying theme is that government interventions that protect creditors weaken the market discipline that might otherwise help to control risks in the financial system. This leaves us with recourse only to regulatory discipline. But as diligent and conscientious as we are in implementing financial regulation, our financial system will continue to face risks as financial market participants direct their innovative energies toward benefiting from perceived protection while circumventing regulatory controls. Ultimately, financial stability will be better served if we can scale back beliefs in a broad safety net and restore a measure of meaningful market discipline.

https://doi.org/10.21144/eq1010101

Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Economic Quarterly

Publication Date: 2015

Issue: 1Q

Pages: 1-4