The short-term U.S. wholesale funding market remains vulnerable to runs and other crisis-era risks and must be made more stable, an influential Federal Reserve official saidWednesday.
New York Fed President William Dudley said changes must be made in part because it is now more difficult, in the post-financial crisis era, for the U.S. central bank to intervene in the market if investors again lose confidence in broker-dealers that rely on short-term funding.
Some "important issues and vulnerabilities remain," Dudley said in kicking off a conference on wholesale funding risks, held at his Fed bank. "It is essential to make the system more stable."
Also Wednesday, Boston Federal Reserve president Eric Rosengren said the role of broker-dealers in short term lending markets may exacerbate financial strains in times of turmoil, and it's a problem that has yet to be addressed.
Dudley did not comment on monetary policy or the economy.