Powell said after the Fed created a Money Market Mutual Fund Liquidity Facility with $10 billion in backing from the Treasury Department, the “turmoil subsided, conditions in short-term funding markets improved and access to credit increased.”
The council received a closed-door briefing from the staff of the Securities and Exchange Commission on the comments it has collected on what reforms need to be pursued to make short-term funding markets more resilient at times of financial crisis.
SEC Chairman Gary Gensler told the group during its open meeting that he has directed SEC staff to prepare recommendations that can be voted on by the five-member SEC. Yellen said she fully supported the efforts by the SEC to reform the current system.
Council members also expressed concern that the global financial system is not moving quickly enough to prepare for the transition away from LIBOR, the London interbank offered rate, which has been the interest rate benchmark for trillions of dollars in financial contracts.
Regulators have supported moving from the LIBOR rate to the Secured Overnight Financing Rate, or SOFR, by the end of this year.
But Yellen and other officials expressed worries that not enough was being done now to prepare for the switch from LIBOR to SOFR.
“More must be done to facilitate an orderly transition,” Yellen told the panel. “While important progress is being made in some segments of the market, other segments, including business loans, are well behind where they should be at this stage of the transition.”