20th Annual Financial Markets Conference: Central Banking in the Shadows: Monetary Policy and Financial Stability Postcrisis — March 30–April 1, 2015

Papers, Presentations, and Videos

Policy Sessions

Policy session 1
Future of Banks: Will Commercial Banks Remain Central to the Financial System? ( Paper  | Presentation   | Video )
Commercial banks have been a central part of the global financial system, even in the United States' relatively more market-based system. However, banks' competitive position is being eroded by new technologies, costly postcrisis regulation, and new policies intended to reduce the value of the safety net. Will commercial banks remain important to the financial system? Or will they be relegated to relatively minor roles, replaced by shadow banks and market-based financing systems?

Paper presenter: Randall S. Kroszner, University of Chicago
Moderator: Loretta Mester, Federal Reserve Bank of Cleveland
Christopher Mazingo, McKinsey & Company
Paul McCulley, formerly of PIMCO
Policy session 2
Macroprudential Policy: Should Shadow Banks Be a Central Focus of Macroprudential Policy? (Video  )
The crisis highlighted the potential for systemic problems to arise in shadow banks and other market-based financing systems. In response, both the international Financial Stability Board and the U.S. Financial Stability Oversight Council have sought to extend macroprudential regulation to shadow banks and some other large financial firms. Yet, whether and how these other market participants affect financial stability is often not well understood. How can we identify which firms and activities pose a systemic risk? For those that do pose a risk, can we adapt existing bank prudential regulation to meet the challenge or do we need a different paradigm? What are the unintended consequences of such regulation?

Chair: Mark Flannery, Securities and Exchange Commission
Simon Johnson, Massachusetts Institute of Technology Sloan School of Management
John Kim, New York Life Insurance Co.
Barbara Novick, BlackRock Inc.
Policy session 3
Financial Stability: How Essential Should Financial Stability Be to Central Banks? ( Paper  | Video  )
Central banks focused largely on the goals of price inflation and employment in the years before the crisis. In the wake of the crisis, however, central banks have placed increased emphasis on the goal of financial stability. Although these goals often have consistent implications for the conduct of monetary and regulatory policy, the policy implications of the goals can be very different. Given the potential for these conflicts, how essential should financial stability be to central banks?

Paper presenter: Martin Hellwig, Max Planck Institute for Research on Collective Goods
Moderator: David E. Altig, Federal Reserve Bank of Atlanta
Charles Goodhart, London School of Economics
Jan Hatzius, Goldman Sachs ( Presentation  )
David Zervos, Jefferies LCC

Policy session 4
Monetary Policy: Will the Traditional Banking Channel Remain Central to Monetary Policy? Video  )
The Federal Reserve's long-standing monetary policy approach of managing short-term interest rates via controlling the supply of reserves will not work given the huge amount of reserves created by quantitative easing. An alternative way of conducting policy would have the Federal Reserve lock up the excess reserves by purchasing them from banks or others looking for overnight investments, such as money market mutual funds. The potential for turning to nonbank funds raises the question of whether the traditional banking channel will remain central to monetary policy, especially in an environment with a huge amount of excess reserves. If not, should policymakers seek an early return to an environment with scarce reserves? Or should policymakers embrace a new approach that relies less on banks?

Chair: Dennis Lockhart, Federal Reserve Bank of Atlanta
Peter Ireland, Boston College
William Poole, Cato Institute
Brian Sack, D.E. Shaw Group


Opening remarks (Speech text | Video  )
Stanley Fischer, Board of Governors of the Federal Reserve System

Keynote address (Speech text   | Video interview )
Robert Rubin, Former U.S. Treasury Secretary and Council on Foreign Relations

Research Papers

Research session 1–"The Role of Banks in the Transmission of Monetary Policy" ( Paper  | Presentation  )

Paper presenter: Joe Peek, Federal Reserve Bank of Boston
Moderator: Larry Wall, Federal Reserve Bank of Atlanta
Discussant: Adam Ashcraft, Federal Reserve Bank of New York ( Presentation  )

Research session 2–"The Macroeconomics of Shadow Banking" ( Paper   | Presentation  )

Paper presenter: Alexi Savov, New York University Stern School of Business
Moderator: Paula Tkac, Federal Reserve Bank of Atlanta
Discussant: Fabio Natalucci, Board of Governors of the Federal Reserve System ( Presentation  )