U.S. Sens. Sherrod Brown (D-OH) and Jack Reed (D-RI) raised concerns with the Federal Reserve about the growing risks posed by the private credit market.
In a letter to Federal Reserve Chair Jerome Powell and Vice Chair Michael Barr, the senators urged federal banking regulators to take action to protect savers and consumers from the risks posed by private credit as it grows in size, complexity, and interdependence with the banks.
“To ensure continued financial stability, the Federal Reserve and other financial regulators must take steps to comprehensively supervise the ties between banks and private credit firms. As the private credit market continues to strengthen its bonds with banks, Americans will be relying on you to ensure the continued safety and soundness of the banking system,” the senators wrote to the Federal Reserve officials.
Brown is the chairman of the Senate Committee on Banking, Housing, and Urban Affairs. The letter follows a similar request the two senators made to the Fed last year.
“The Federal Reserve must prioritize data collection and risk monitoring of the private credit sector,” the senators wrote.
“In particular, private credit’s links with the traditional banking system must be closely examined for hidden risks.
“To ensure continued financial stability, the Federal Reserve and other financial regulators must take steps to comprehensively supervise the ties between banks and private credit firms. As the private credit market continues to strengthen its bonds with banks, Americans will be relying on you to ensure the continued safety and soundness of the banking system,” they concluded.