The New York Fed Chief Is Facing His Biggest Test. Here’s His Response.

There’s concern on Wall Street that you ousted Mr. Potter and Mr. Dzina, and, in doing so, set a tone at the New York Fed in which experts may not feel comfortable speaking up, especially about repo market issues. What is your response to that?

“It’s just completely wrong, in terms of what actually happened,” he said, noting that when rates started to spike in the market for repos earlier this month, he and Ms. Logan were both in Washington for the Federal Open Market Committee meeting.

“It was all hands on deck. Everyone was working tirelessly to understand what was happening,” he said. “The team operated magnificently, there was no delay, there was no hesitation — there was no, in any way, feeling that people weren’t sharing and discussing things very quickly. This is something that Lorie, Lorie Logan, and her colleagues have been preparing for, for years.”

“We have complete confidence in the teams’ analysis, and conclusions, and it played out exactly the way you would want it to,” he said.

When it comes to the recent repo market turmoil, what does a long-term solution to fixing that look like?

“We have learned something. Despite there being a lot of reserves in the system, they weren’t moving around. They’re lumpy.”

When it comes to the level of bank reserves needed going forward, “any view I had before, based on all the research, and the outreach, and the surveys, my view would be that — that level is probably higher,” Mr. Williams said.

Article source: https://www.nytimes.com/2019/09/29/business/economy/new-york-fed-repo-market.html?emc=rss&partner=rss