Federal Reserve Governor Lisa Cook Reflects on the Stakes of Financial Stability
In a talk presented by the Yale Program on Financial Stability, Cook discussed the Fed’s approach to monitoring the U.S. financial system and lessons learned from her tenure.
When the Australian government eradicated feral cats on Macquarie Island, it succeeded in saving rare native birds—but triggered an unwanted surge in the rabbit population.
For Federal Reserve Governor Lisa Cook, Australia’s experience functions as a reminder that actions meant to fix one problem can create others elsewhere. While it may be desirable to remove the metaphorical feral cats, she told an audience at SOM, “policymakers should be prepared to manage the ensuing bunny boom too.”
Cook, the first Black woman to serve as a Federal Reserve governor, visited Evans Hall on March 26 for a talk presented by the Yale Program on Financial Stability (YPFS). The event was moderated by Andrew Metrick, the director of YPFS and the Janet L. Yellen Professor of Finance and Management.
Cook highlighted several lessons from her tenure, including the importance of viewing markets and institutions as an interconnected system, rather than isolated sectors. She emphasized the need for high-quality data and commended YPFS’s recently completed New Bagehot Project—a dataset of banking crises over 850 years, accessible through a research-friendly platform—calling the initiative a “valuable public service.” (She did not discuss the pending Supreme Court case that will determine whether President Donald Trump can remove her from her post.)
A key focus of Cook’s remarks was the importance of the Financial Stability Report (FSR), a semiannual assessment published by the Fed.
“Since its inception, the FSR was designed to act as a platform that policymakers could build upon to develop their own views about the system’s overall resilience, rather than expressing a centralized view,” she said.
She also reflected on scenario analysis, which she described as the “analytical workhorse” of financial stability policymaking. Designed to model shocks that may have no historical precedent, the tool can help policymakers “break free of the well-known human tendency to believe that tomorrow will be like today,” she said.
During the Q&A segment, Cook addressed the Iran war’s impact on inflation risk and AI’s implications for labor and financial markets. Cook, who spent 25 years studying the economics of innovation, placed herself “right in the middle” of the labor-augmenting versus labor-replacing debate about AI. She described AI as a general-purpose technology that will likely be transformative for the labor market.
“Americans depend on a stable financial system to start and support families, buy homes and vehicles, start businesses, and pay for their education,” Cook said. “Ultimately, our efforts to maintain financial stability are a service to the American people.”
