Home

This post – co-authored with our friend and colleague, Richard Berner (NYU Stern School of Business) – was submitted in August 2025 as a comment to the U.S. bank regulatory agencies regarding their proposed modifications to the leverage ratio standards for U.S. global systemically important banks.

To Whom It May Concern:

We write to oppose the agencies’ proposal to alter the enhanced Supplementary Leverage Ratio (eSLR).

In our view, the proposal substantially weakens leverage, total loss-absorbing capacity, and long-term debt requirements for global systemically important banks (GSIBs). As a result, it would reduce key safeguards implemented in response to the 2008 financial crisis and add to the risks of serious financial instability and taxpayer-funded GSIB bailouts that Congress and the agencies sought to eliminate….

As most readers of this blog know, the Federal Reserve is an idiosyncratic mix of public and private. The Board of Governors of the Federal Reserve System is a part of the Federal Government, while the Federal Reserve Banks are private, nonprofit corporations and chartered banks owned by their commercial bank members. The operational capacity of the system – the ability to buy and sell domestic or foreign securities, provide loans to banks or foreign central banks, and engage in repurchase agreements or reverse repurchase agreements – belongs to the Reserve Banks. Then there is the Federal Open Market Committee (FOMC), which sets interest rate and balance sheet policy.

Recent attacks on Federal Reserve independence lead us to ask the following question: Who in the Federal Reserve System controls monetary policy? Put differently, to lower short-term market interest rates as he wishes, what aspect of the Federal Reserve would the President need to control? In this post, we attempt to answer this question.