Business Case Studies & Business Publications

The Federal Reserve's Evolution in Manag...

Sun, Bo

Technical Note

The Federal Reserve's Evolution in Managing Financial Uncertainty: From Crisis Management to Proactive Policy

Sun, Bo

GEM-0245 | Published June 9, 2025 | 4 Pages Technical Note

Collection: Darden School of Business

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This case explores how the US Federal Reserve (Fed) continuously designed its approach to financial stability policy in response to pervasive uncertainty in modern financial markets. Following the 2008 crisis, the Fed developed new institutional frameworks—including the Division of Financial Stability, comprehensive stress testing, and international swap line networks—to manage unknown and unpredictable systemic risks. The case discusses how policymakers balance proactive monitoring with crisis response when facing fundamental uncertainty about financial system vulnerabilities. Through analysis of the Fed's responses to COVID-19 pandemic market disruptions and the Silicon Valley Bank collapse, students explore the challenges of designing robust policies under uncertainty, including moral hazard concerns and the limits of predictive modeling. This case is effective for MBA courses on policymaking under uncertainty, financial regulation, and central banking. It is taught in an elective on managing economic uncertainty at UVA Darden's residential MBA program.