Chicago Sun-Times

YELLEN DENIES POLITICS INFLUENCE FED DECISIONS

Chair repudiates Trump allegation­s, tells Congress big banks must ‘ be held accountabl­e’

- @NathanBome­y USA TODAY Nathan Bomey

Federal Reserve Chair Janet Yellen on Wednesday defended the Fed’s role in setting monetary policy devoid of political interests and pledged to tighten rules on big banks.

Her comments came as the Wells Fargo scandal reignites a firestorm over Washington’s role in monitoring financial giants.

“We will hold the largest organizati­ons to exceptiona­lly high standards,” Yellen testified before the House Financial Services Committee when asked if the Fed would break up Wells Fargo.

She said executives at big banks must “be held accountabl­e” for “wrongdoing” and that boards must regularly review ex- ecutive compensati­on to prevent “compliance failures” and unethical treatment of customers.

Meanwhile, the Fed’s monetary policy has drawn criticism from Republican presidenti­al candidate Donald Trump, who accused Yellen during Monday’s debate of setting monetary policy based on political motivation­s.

The Fed has raised interest rates once since the Great Recession despite significan­t job gains and easy credit, saying it would like inflation to be higher and that it has not wanted to jeopardize tepid economic growth.

Rep. Scott Garrett, R- N. J., seized Trump’s mantle during Wednesday’s hearing, saying “the Fed has an unacceptab­le cozy relationsh­ip” with the Obama administra­tion and Democrats.

“As the saying goes, perception is reality,” Garrett told Yellen. “Whether you like it or not, the public increasing­ly believes that the Fed’s independen­ce is nothing more than a myth.”

Asked whether politics motivates the Fed’s decisions, Yellen testified, “I have never seen that on the part of any of my colleagues.” She added later, “I have certainly never been pressured in any way by the administra­tion.”

Multiple Democrats jumped to her defense. “I am disturbed by anyone in a recent debate or anywhere who suggests that Chair Yellen is somehow acting politicall­y,” Rep. Carolyn Maloney, D- N. J., said. “Nothing could be further from the truth.”

Yellen’s appearance before the committee came as outrage continues over Wells Fargo’s admission it had opened potentiall­y 2 million fake accounts without customers’ permission.

The company said Tuesday that CEO John Stumpf had agreed to give up $ 41 million in unvested stock awards and that community banking chief Carrie Tolstedt would lose all of her unvested stock and would receive no additional retirement benefits.

“Is there anything you can do?” Rep. Stephen Lynch, D- Mass., asked. “Just get after them and make their life hell.”

Yellen responded, “I think it is very important that senior management be held accountabl­e” when there are “identifiab­le individual­s who have been involved in wrongdoing.”

Meanwhile, investors are watching for any hints on interest rates after the Fed opted this month to keep rates steady but signaled an increase is possible by the end of the year.

Yellen struck a similar tone Wednesday, saying “we’re really not seeing meaningful upward pressure on inflation” but warning that without a change soon, employment growth could cause the economy to “overheat.”

 ?? PABLO MARTINEZ MONSIVAIS, AP ??
PABLO MARTINEZ MONSIVAIS, AP

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