Gate News reports that on March 26, Federal Reserve Chair nominee Kevin Warsh expressed hope to significantly reduce the Fed’s $6.6 trillion balance sheet. Stanford Graduate School of Business professor and long-term Fed advisor Darrell Duffy noted in a new paper that Warsh might need more than one term to accomplish this task. Duffy stated that if the Fed wants to reduce its influence on financial markets substantially without causing severe stress, reforms are necessary, including a complete overhaul of bank liquidity requirements and redesigning the payment system. Once Warsh is appointed by the U.S. Senate and receives support from colleagues, he can immediately implement some reforms. However, Duffy pointed out that other reforms could take up to five years, meaning the work could extend beyond Warsh’s four-year chairmanship.
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