Fed Nominee Waller May Need Five Years to Shrink Balance Sheet

On March 26, Federal Reserve Chairman nominee Kevin Waller aims to significantly shrink the Fed's $6.6 trillion balance sheet. A top financial economist suggests it may take him more than one term to accomplish this task. Darrell Duffie, a Stanford Graduate School of Business professor and long-time Fed advisor, argues in a new paper that if the Fed wishes to substantially reduce its footprint in financial markets without causing severe stress, reforms are needed, including a complete overhaul of bank liquidity requirements and a redesign of the payment system. Once Waller secures Senate confirmation, some reforms could be implemented immediately, provided he has the support of his colleagues. Duffie stated that other reforms could take up to five years, implying the work would extend beyond Waller's four-year chairmanship. (JIN10)