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Fed Worries About Liquidity Squeezes Beyond Money Markets

Feb. 7, 2020, 10:00 AM

Federal Reserve Chairman Jerome Powell and his colleagues have long recognized that some of the post-crisis rules that make the banking system safer also could end up making the financial markets more brittle.

That’s a risk that was highlighted by last year’s turmoil in the money markets and was flagged as far back as 2014 -- at a Fed board meeting that approved tough liquidity requirements to make banks more secure and which Powell attended as a governor.

The Fed’s concern is that cash may not flow to where it’s needed most in a crunch -- just as seemingly ...