Enters the slippery political risks from climate change
Pres. Trump has called climate change a China hoax in the past, but that is not stopping Fed’s Powell to talk to it.
- Increase severe weather poses some increased risk to expose institutions
- he believes severe weather is due to climate change
- Fed requires banks to have planned for severe weather risk
The Fed Chair did not dismiss the impact on the economy of climate change.
Collateralized loan obligations (CLO) concentrated in market-based vehicles, not banks
- Does not see corporate debt rising to the level of systematic risk
- Most CLO debt concentrated in market-based vehicles, not banks
- Most CLO debt is not runnabe, though some mutual funds could see accelerated withdrawals
On the dollar as a reserve currency, Powell says:
- being reserve currency has benefits and costs
- one cost is a lack of fiscal discipline
- Does not see near-term risk to dollar as reserve currency
- Don’t assume USD status as reserve currency permanent
- US needs to address longer-term fiscal issues