Wall Street strategists say Kevin Warsh’s review panel faces a hard trade-off: reduce the Federal Reserve’s $6.7 trillion holdings without disrupting short-term funding markets.
The concern centers on execution, with analysts warning the panel’s senior academics and former policymakers may produce ideas that work in theory but prove difficult to carry out in markets.
That risk is heightened by the panel’s lack of market specialists, even as its academic and policy credentials give the balance-sheet review added credibility.
The challenge underscores how any Fed balance-sheet runoff must balance policy goals with market plumbing, where missteps can quickly spill into funding conditions.