The History of Cyclical Macroprudential Policy in the United States

75 Pages Posted: 25 May 2013

See all articles by Douglas Elliott

Douglas Elliott

Brookings Institution

Greg Feldberg

Yale University - Yale Program on Financial Stability; Yale School of Management

Andreas Lehnert

Board of Governors of the Federal Reserve System

Date Written: May 15, 2013

Abstract

Since the financial crisis of 2007-2009, policymakers have debated the need for a new toolkit of cyclical "macroprudential" policies to constrain the build-up of risks in financial markets, for example, by dampening credit-fueled asset bubbles. These discussions tend to ignore America's long and varied history with many of the instruments under consideration to smooth the credit cycle, presumably because of their sparse usage in the last three decades. We provide the first comprehensive survey and historic narrative of these efforts. The tools whose background and use we describe include underwriting standards, reserve requirements, deposit rate ceilings, credit growth limits, supervisory pressure, and other financial regulatory policy actions. The contemporary debates over these tools highlighted a variety of concerns, including "speculation," undesirable rates of inflation, and high levels of consumer spending, among others. Ongoing statistical work suggests that macrop rudential tightening lowers consumer debt but macroprudential easing does not increase it.

Keywords: Macroprudential policy, financial stability, credit cycles, regulation, Federal Reserve history, credit

JEL Classification: E32, E44, E63, E65

Suggested Citation

Elliott, Douglas and Feldberg, Greg and Lehnert, Andreas, The History of Cyclical Macroprudential Policy in the United States (May 15, 2013). FEDS Working Paper No. 2013-29, Available at SSRN: https://ssrn.com/abstract=2269090 or http://dx.doi.org/10.2139/ssrn.2269090

Douglas Elliott

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Greg Feldberg

Yale University - Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Andreas Lehnert (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-3325 (Phone)
202-263-4852 (Fax)

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