The History of Cyclical Macroprudential Policy in the United States

Since the financial crisis of 2007-2009, policymakers have debated the need
for a new toolkit of cyclical “macroprudential” policies to constrain the
build-up of risks in financial markets, for example, by dampening creditfueled asset bubbles. These discussions tend to ignore America’s long and
varied history with many of the instruments under consideration to smooth
the credit cycle, presumably because of their sparse usage in the last three
decades. We provide the first comprehensive survey and historic narrative
of these efforts. The tools whose background and use we describe include
underwriting standards, reserve requirements, deposit rate ceilings, credit
growth limits, supervisory pressure, and other financial regulatory policy
actions. The contemporary debates over these tools highlighted a variety of
concerns, including “speculation,” undesirable rates of inflation, and high
levels of consumer spending, among others. Ongoing statistical work
suggests that macroprudential tightening lowers consumer debt but
macroprudential easing does not increase it.