July 6, 2021

On March 17, a report from the Federal Reserve Bank of New York (the Federal Reserve Board) warned that the financial industry could be headed for a “post-fiscal cliff” recession that would “be severe and prolonged.”

If the Fed had its way, the financial crisis would be averted.

On Thursday, the Senate Banking Committee voted unanimously to support the resolution, and the vote is expected to pass the full Senate soon.

This story is developing.

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It’s worth noting that while the Fed’s report is likely to be viewed by Wall Street as an attack on the financial system, its language is much more restrained than the Fed typically adopts.

Specifically, it says the financial services sector will experience a “gradual recovery,” rather than a full-blown collapse.

The Fed’s position is not as harsh as it may seem, however, given that the sector is largely owned by private-equity firms that are heavily regulated and are also subject to the vagaries of Wall Street’s market dynamics.

While the Fed has traditionally been more cautious in its assessments of the financial market than the Federal Deposit Insurance Corporation (FDIC), it has been reluctant to intervene in the market in the past.

In recent years, the Fed took a more aggressive stance in response to financial crises, but it’s not clear whether this latest push will be enough to make a difference.

One thing is clear: this will be a pivotal moment in the debate over how much of the federal government’s financial regulatory burden falls on the banking industry.

Wall Street is expected not to be able to afford to wait long.