YELLEN PUTS `STAKE IN THE GROUND'
Fed chair warns prez against banking changes
Federal Reserve Chair Janet Yellen issued a stark warning that the next financial crisis could come at any time, staunchly defending post-recession regulatory changes that have come under political fire recently in what many expect to be her final major speech.
“We can never be sure that new crises will not occur,” Yellen told a group of central bankers and policy makers from around the world at a summit in Jackson Hole, Wyo.
Yesterday, she defended regulatory safeguards that were put in place after the financial crisis, including the 2010 Dodd-Frank Act, although not by name.
“The balance of research suggests that the core reforms we have put in place have substantially boosted resilience without unduly limiting credit availability or economic growth,” Yellen said.
Yellen’s stance comes in stark contrast to President Trump, who has repeatedly said he would work to dismantle Dodd-Frank, which creates regulatory safeguards that enforce transparency and accountability on banks and financial firms.
“She’s making the statement: Don’t forget what caused the financial crisis, these safeguards should not be dismantled,” said Mark Williams, a professor at Boston University and a former Federal Reserve official. “She’s really putting a stake in the ground.”
Dismantling Dodd-Frank has long been a promise of Trump, and top White House officials have said they will take aim at legislation that would overhaul rules governing the financial industry. Trump convened a group of community bank executives earlier this year, telling them he wants to move with some urgency.
“Any adjustments to the regulatory framework should be modest and preserve the increase in resilience at large dealers and banks,” Yellen said.
Trump is weighing whether to nominate her for another term as chair when her current one expires in February. Yellen has not given any indication if she would accept, but Trump has criticized her and the Fed, saying during the campaign she should be “ashamed” of herself. White House economic adviser Gary Cohn has been frequently mentioned as a possible replacement.
Williams said Yellen’s speech could be a signal that Yellen either knows she will not be renominated, or is simply not interested.
“She feels because she is not going to be reappointed and has no interest, she has more freedom,” Williams said. “It was a reminder to Trump, the Trump administration, that they need to be very thoughtful with policy and who they choose to replace Janet Yellen.”