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Biden Treasury nominee Nelly Liang quietly starts work to curb Wall Street

Nelly Liang, the election of President Biden to serve as Deputy Treasury Secretary of the Treasury, did not wait to run before the issue of tightening control over Wall Street began.

Already a secretary to Annette Yellen, 63-year-old Liang has become a key figure in inter-agency discussions on financial regulation and stability, according to more than half a dozen people familiar with the matter.

This is an area where Democrats want to tighten the rules after a four-year stalemate under President Donald Trump.

People say Liang was involved in discussions in the $ 21 trillion treasury market in March last year. He also took part in a close-knit meeting with regulators on February 4, according to people, according to GameStop’s growing social media stock channels.

The White House officially announced on Thursday that Biden intends to nominate Liang for the post, along with three other people who have been appointed to the post of Assistant Secretary.

Liang declined to comment on the article, as did a Treasury spokesman.

Following Liang’s regulatory agenda is unlikely to take months if it is approved. Since 2014, the Treasury has not had an approved Deputy Minister of Internal Affairs. During that time, the senior consultants actually completed the work.

Liang spent most of his career as an economist in the Federal Reserve, where he became the founding director of the central bank’s financial stability department in 2010 and was a senior official during Ellen’s tenure. Since leaving the Fed in 2017, Liang has been critical of some of its regulatory moves, especially those that came before the central bank also cut interest rates.

His gaze may disturb some thoughts on Wall Street և Capitol Hill. Indeed, Republicans have already blocked Liang once after Trump, in a surprise move, nominated him for the Fed’s Board of Governors in 2018.

Republicans at the time believed he played a key role as Fed staff in a wave of post-crisis rules that was far from over. He never received confirmation hearings, but eventually withdrew.

“I’m sure the banks would prefer someone much more sympathetic to them, but given the list of options for a democratic administration, I doubt they would be happy to have him,” said David Wessel, director of the Hutchins Fiscal Center. և Monetary policy at the Brookings Institution, where Liang was a senior fellow after leaving the Fed.

Based on unpublished comments he made in an interview with Bloomberg in October, based on his past articles and articles, Liang is not a progressive ideologue. His approach to regulation reflects his time in the FD, where policy changes are slow to take place after a thorough examination.

He is adamant that more aggressive government intervention in the financial markets could limit the flow of credit into the economy. But that is sometimes the point, especially when historically low interest rates encourage risk.

“Now there is a cost to borrowing, instead of having debt, which hinders recovery,” Liang said in an October 2020 interview. “Different policy makers intend to go down one way or another. The idea is to have that conversation. ”

This two-handed approach makes Liang a typical central bank product, but in other ways it does not fit into the Fed’s assimilation.

Born in Chicago to Chinese immigrants, Chic holds a bachelor’s degree in economics from Notre Dame University and a Ph.D. From the University of Maryland. They may not be the kind of ultra-elite institutions that are common in the resumes of Fed officials, but Liang gradually rose through the ranks.

After the crisis of 2008, Liang played a key role in designing and implementing the first “stress tests”, a kind of war games exercise for the big banks that helped restore confidence after the industry collapsed. They have been repeated every year since.

Liang’s view on the hot topic of leverage restrictions on megabank levers like JPMorgan Chase և Citigroup could clash with the industry. He argues that allowing banks to play what they include in their assets would “undermine the primary value of existing rules.”

He also criticized the Fed’s move to blur the edges of annual banking stress tests. In general, he argued that in July 2019, it was stated that the bank’s capital level should be kept at least as high as it was.

In the Treasury market, which was rocked by a panic from investors by COVID a year ago that led to liquidity disappearing, prompting massive Fed intervention, Liang signaled his desire for reform.

In a December paper, he suggested that Pat Parkinson, co-author of the Banking Policy Institute, one of the largest US banks, “pay close attention to the broader mandate of centralized clearing.” This can reduce the influence of the partner և, thus the risk of escape, limiting their current high market dependence on dealer balances նրանց their ability to handle stressful market events.

More broadly, Liang is likely to work to rejuvenate the Financial Stability Board or the FSOC. It is chaired by the Secretary of the Treasury and includes the heads of eight regulatory agencies. The purpose of the Congress was to increase coordination and to address a wide range of systemic risks. But his powers, which were already weak, dried up under Trump.

“I would be surprised if he did not have a big impact on the FSOC agenda,” said Peter Fischer, who served as deputy secretary under George W. Bush and now teaches at the Tuck School of Business at Dartmouth College. “In fact, it would be a ridiculous waste of time not to delay Nellie’s knowledge in this area.”

In October 2019, Liang criticized the treasury’s decision that year, making it more difficult for the panel to brand or “designate” non-bank financial companies as a systemic capability, a label that tightens control.

The question is whether the FSOC should be able to force individual regulators, such as the Securities and Exchange Commission or the Federal Housing Authority, to act on a perceived systemic threat. Currently it can only request a transfer from the agency.

“In that sense, the FSOC is not a very functional organization,” Liang said in an October interview. “The heads of some agencies do not really think. “They do not see their own agency having a mandate for financial stability.”

He said that the question for FSOC is: “Should it be just a talk show or a superpower?”

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