William Dudley, who used to oversee the Federal Reserve’s interaction with financial markets, said the central bank should introduce a long-discussed but never implemented tool to ensure U.S. cash markets remain calm.
In a column published Monday by Bloomberg Opinion, the Fed Bank of New York’s former president recommended creating a standing repurchase-agreement facility, joining a chorus of proponents. It should be open, he argued, to a broad set of counterparties and accept Treasury and agency mortgaged-backed securities as collateral.
WATCH: Bill Dudley says the Fed must be forward thinking in its new monetary policy regime.
“Such a facility would effectively cap repo rates,” Dudley wrote. “It would also address the potential problem of ...