Richard Berner, professor of management practice at New York University and formerly the first director of the Treasury Office of Financial Research, as well as the global economics head at Morgan Stanley, joins Mark Sobel, US chairman of OMFIF.
Richard commends the rapid US macroeconomic policy response to the coronavirus crisis, particularly the Federal Reserve’s shock and awe approach. However, he expresses concern about US vulnerabilities, such as overreliance on monetary policy, the risk that the Fed is entering the terrain of fiscal policy choices, as well as a fraught system of fiscal federalism and government finances. While praising the Fed swap lines, Richard and Mark discuss the inadequacies of multilateral co-operation in tackling the crisis. On financial stability, Richard notes that even though banks are in much better shape than at the time of the global financial crisis, NYU Volatility Lab’s Systemic Risk measure is pointing to elevated systemic risks in major banks, including in the US. He concludes that the crisis has exposed major financial system vulnerabilities, especially in the non-bank sector, which will require authorities’ attention.