This direct approach would, I believe, yield maximum financial stability benefits at the lowest cost to financial intermediation, financial firms, and financial supervisors. But these benefits obviously depend on these better targeted forms of regulation actually being developed and implemented.
In the event, the Fed refrained from tapering in September, out of concern about the slow pace of recovery in the US labour market; the unresolved fiscal issues in the US which could lead to further fiscal contraction when the debt ceiling is reached, possibly in mid-October; and the negative impact of tight financial conditions and higher long term interest rates on the nascent housing market recovery in the US.