Former Fed President Plosser on Fed, Markets, Banks

The transcript discusses the challenges faced by the FOMC, including issues with strategy and market perception. It delves into the psychology of decision-making within the FOMC, highlighting the role of dissent and transparency. The conversation also touches on systemic risk, particularly concerning Deutsche Bank, and the preparedness of central banks. Finally, it examines bank regulation, the concept of 'too big to fail,' and the need for simpler regulations with higher capital requirements.

What is one of the main challenges the Hawks face in convincing the Doves at the Federal Reserve?

• Lack of a clear strategy

• Excessive market confidence

• Too much data

• High inflation rates

Why does the Federal Reserve face credibility issues according to the discussion?

• They always follow market predictions

• They frequently change their data sources

• They have too many voting members

• They talk about raising rates but rarely act

What is a significant factor affecting decision-making within the FOMC?

• Fear of inflation

• Fear of causing a recession

• Fear of unemployment

• Fear of losing market share

How does dissent within the FOMC affect the Federal Reserve's decision-making process?

• It leads to better transparency

• It creates confusion in the market

• It results in faster decisions

• It causes unanimous decisions

What is a key issue with European banks like Deutsche Bank compared to US banks?

• They have fewer regulations

• They are less well-capitalized

• They are more profitable

• They have more capital

What is suggested as a solution to the 'too big to fail' problem?

• Reducing capital requirements

• Increasing the number of banks

• Simplifying regulations and increasing capital requirements

• Eliminating all regulations

What role should central banks play according to the discussion?

• Decreasing inflation

• Increasing interest rates

• Focusing on monetary policy and economic stability

• Rescuing failing banks