Introducing the amazing new Countercyclical Capital Buffer!!!!!!
Federal Reserve officials are weighing whether to use a tool that could reduce the risk of a credit crunch in a downturn.
The tool is known as the countercyclical capital buffer. It allows the Fed to require banks to hold more loss-absorbing capital should the economy show signs of overheating, or to keep less of it during bad economic times. The buffer applies generally to banks with more than $250 billion in assets, including firms such as JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc.
The Fed’s board of governors so far hasn’t used the tool, approved in 2016. Its rule on the buffer says it should turn it up when economic risks are “meaningfully above normal” and reduced when they “abate or lessen.”
Now, some Fed officials are debating whether it is time to use the tool, which could provide banks with additional lending firepower in a subsequent downturn. It isn’t clear when they might make a decision.
I have obtained an exclusive image of this cool new tool: