The Fed: Debt not a big threat yet to U.S. economy, Cook says, but Fed can’t let down its guard

by | Nov 6, 2023 | Stock Market

Households, businesses and banks are in pretty good financial health and don’t appear to pose a big threat to the U.S. economy, a senior Federal Reserve official said Monday. “In my view, our financial system is substantially more resilient than it was in the mid-2000s,” said Fed governor Lisa Cook in a speech at Duke University.

Cook said household debt such as car loans, credit cards and mortgages “remains at modest levels.” In addition, most of the debt is owned by those with “strong credit histories or considerable home equity,” she said. Business debt is near historically high levels, she noted, but companies appear to have the means to pay off their bills due to robust profits. So far, rising interest rates have not hurt them much. Banks and most other financial institutions, meanwhile, “remain sound and resilient overall,” she said, and have ample financial cushion that often exceeds regulatory requirements. “In the banking industry, the deposit volatility that we saw earlier this year has abated,” Cook said, referring to a brief run on deposits after the failure of Silicon Valley Bank. Still, Cook said she and other senior Fed officials are closely monitoring the financial system for emerging signs of stress. She said the amount of leverage, or money …

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