The banking sector is improving
The U.S. financial system has come a long way from fall 2008, when White House economic policy leaders and bank CEOs threw together emergency measures to keep the banking sector from imploding and to stop the economy's free fall.
U.S. Treasury Secretary Jacob Lew highlighted the progress in recent testimony before the Senate Committee on Banking, Housing and Urban Affairs, citing an increase in bank capital, stronger corporate liquidity and funding profiles, better regulatory coordination and new rules for over-the-counter derivatives to reduce risks.
The overall economy has benefited from and contributed to this picture of improving health. It is adding jobs, housing prices are recovering from the bust, consumer spending is up and corporate profits are robust.
But Lew, chairman of the Financial Stability Oversight Council, or FSOC, warns that policymakers must not become complacent. The work of strengthening and reforming the financial system that began with the Dodd-Frank Act must continue, with the oversight council recommending five key steps that directly affect individuals whose assets, debt obligations and net worths are tied to the financial system.
"Despite these positive developments, there are still risks to U.S. financial stability," Lew told the Banking Committee.