Michael S Barr: Deregulating in a financial boom - what could go wrong?
What changed vs prior statement
- 01Shift from a focus on financial health to concerns over deregulation during a financial boom.
- 02Increased emphasis on potential risks associated with deregulation, indicating a more cautious outlook.
- 03No vote-record change.
From the original
Speech by Mr Michael S Barr, Member of the Board of Governors of the Federal Reserve System, at the American University, Washington DC, 6 June 2026.
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Fed's Barr warns shrinking balance sheet via liquidity cuts risks stability
Lead — Fed Governor Michael Barr's recent comments underscore a critical stance against proposals to shrink the Fed's balance sheet by loosening liquidity requirements, which he argues could jeopardize financial stability. Per the full note [source], Barr highlighted that reducing liquidity buffers could lead banks to rely more heavily on Fed facilities during market stress, ultimately increasing the central bank's market presence rather than diminishing it. This perspective aligns with the ongoing debate about the Fed's role in financial markets, particularly in light of the 2023 banking stress episode. The desk believes that Barr's defense of current liquidity requirements signals a cautious regulatory environment that may impact bank profitability and market dynamics moving forward.