Fed Advisor: Powell May Need Five Years to Trim Fed's Balance Sheet

March 26 — Federal Reserve Chair nominee Kevin Warsh aims to significantly shrink the Fed’s $6.6 trillion balance sheet, but a top financial economist says the task may take more than one term to complete. Stanford Graduate School of Business professor Darrell Duffie, a longstanding Fed advisor, notes in a new paper that substantial cuts to the Fed’s financial market footprint without undue stress will require reforms—including an overhaul of bank liquidity requirements and a redesign of the payment system. Once confirmed by the U.S. Senate, Warsh could implement some reforms immediately if he has support from his Fed colleagues. Duffie adds other reforms may take up to five years, meaning the work would extend beyond Warsh’s four-year term as chair. (FXStreet)