It can weaken the political power of entrenched business interests that might otherwise block institutional reforms, a point that is emphatically made by Rajan and Zingales (2004) in their book Saving Capitalism from the Capitalists. Trade liberalization, which promotes a more competitive environment, will lower the revenue of entrenched firms so that they will need greater access to external sources of capital.
In fulfilling its traditional lending function, the Federal Reserve enhances the stability of our financial system, increases the willingness of financial institutions to extend credit, and helps to ease conditions in interbank lending markets, thereby reducing the overall cost of capital to banks.