After publication of the stress test results, those banks raised significant private capital, and confidence slowly returned to the markets. And, just as slowly, the economy began to function again. Putting the tools back on the shelf It’s a bit quieter at the Fed these days.
We should also take into account the role that the market itself can play in controlling risks to public objectives; as I noted last month, market discipline can be an important element in a well-functioning regulatory scheme. And as I have already observed this morning, any regulatory changes should fulfill the test of consistency, across both institutions and instruments.