MNI POLICY: Quarles Not Seeking MBS Backstop, Banks Resilient

By Evan Ryser

     WASHINGTON (MNI) - Fed Vice Chair Randal Quarles told a Congressional

committee he isn't considering an emergency facility to support mortgage-backed

securities, and downplayed the chance that further coronavirus waves will

trigger a financial crisis.

     "We are not currently considering an additional facility," Quarles said

before the House Financial Services Committee with regulators on Wednesday, that

was taped and released on Thursday. The Fed's position on MBS lines up with the

view Treasury Secretary Steven Mnuchin gave last month that he wasn't looking at

a Fed facility. 

     Quarles said that if significant strains arise "we will consider an

appropriate response." Pressed by legislators over the commercial real estate

market, Quarles said "monitoring is not a passive or casual activity," and the

Fed is in the middle of stress testing major financial institutions to account

for damage from Covid-19.

     The stress tests -- usually released in late June -- will be done this year

on an accelerated basis, Quarles said.

     --RESILIENT LENDERS

     As the shutdown continues the economic strain will increase, he said,

adding the "level of uncertainty of how this will evolve is so great that I

would not want to predict how it will evolve."

     Quarles downplayed chances the pandemic will trigger a financial crisis,

saying institutions were strong beforehand and are resilient to a variety of

scenarios.

     The Fed is "certainly open to considering evolution" of the Main Street

lending facility, Quarles said when asked about lowering the bottom limit of the

range of eligible borrowers. Today that threshold is USD500,000 to USD25

million.

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com

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