With bank resilience weakened and the money market hindered, who can withstand this combination of blows?

Baal says that loosening liquidity regulations to reduce the Federal Reserve's balance sheet size is a bad idea and could harm the safety of the financial system. He points out that shrinking the balance sheet is not an end goal, and related plans could weaken bank resilience, hinder money market operations, and even increase the Fed's influence in the market, warning that relying on bank liquidity holdings as an alternative to reduction could increase dependence on Fed tools. He emphasizes that the focus should be on the effectiveness of monetary policy, not the size of the balance sheet.