Sen­a­tors quiz Yellen on fi­nance rules

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - BINYAMIN APPELBAUM THE NEW YORK TIMES

WASH­ING­TON — The U.S. econ­omy is do­ing well enough that sen­a­tors largely ig­nored the sub­ject as they ques­tioned Fed­eral Re­serve Chair­man Janet Yellen for two hours Thurs­day morn­ing.

In­stead, her ap­pear­ance be­fore the Se­nate Bank­ing Com­mit­tee was de­voted mostly to reg­u­la­tory is­sues.

Repub­li­cans sought Yellen’s sup­port for pro­pos­als to loosen or elim­i­nate some stric­tures im­posed on fi­nan­cial in­sti­tu­tions after the 2008 fi­nan­cial cri­sis. Democrats pressed her to af­firm the im­por­tance of those reg­u­la­tions.

Yellen, who has played a cru­cial role in re­build­ing the reg­u­la­tions, made it clear that she was proud of her work.

“I be­lieve we have done a great deal since the fi­nan­cial cri­sis to strengthen the fi­nan­cial sys­tem and to make it more re­silient,” she told the com­mit­tee. Asked whether some of the roll­backs pro­posed by the Trump ad­min­is­tra­tion and con­gres­sional Repub­li­cans might in­crease the chances of a new cri­sis, she said, “Some of them, yes.”

At the same time, Yellen was care­fully con­cil­ia­tory, re­peat­edly agree­ing that some rules might be too strict, and ex­press­ing a gen­eral will­ing­ness to con­sider changes. She also re­it­er­ated her sup­port for re­duc­ing the reg­u­la­tion of com­mu­nity banks, a pop­u­lar idea among mem­bers of both par­ties, although specifics are hard to come by.

Yellen said lit­tle about mon­e­tary pol­icy, the stated pur­pose of the bian­nual hear­ing. The Fed raised its bench­mark in­ter­est rate in June for the third con­sec­u­tive quar­ter, and it plans to be­gin re­duc­ing its bond hold­ings this year.

Yellen said the econ­omy

re­mained in good health.

“I don’t see any­thing in­her­ent in the na­ture of the ex­pan­sion that sug­gests it will come to an end any­time soon,” she said.

Ap­pear­ing be­fore a House com­mit­tee Wed­nes­day, Yellen said that the Fed was pay­ing close at­ten­tion to the re­cent weak­ness of in­fla­tion. On Thurs­day, she of­fered a slightly dif­fer­ent take, say­ing that slug­gish in­fla­tion was a con­cern but that the Fed also re­mained con­cerned that strong job growth might lead to more in­fla­tion.

Sen. Mike Crapo, the Idaho Repub­li­can who chairs the bank­ing com­mit­tee, opened the hear­ing Thurs­day by ex­press­ing con­cern that reg­u­la­tors, in­clud­ing the Fed, were impeding growth by con­strain­ing bank lend­ing.

“I reg­u­larly hear from Idaho busi­ness­men and women who are con­cerned about ac­cess to loans that would cre­ate jobs and build a healthy econ­omy,” Crapo said.

He fo­cused in par­tic­u­lar on a re­quire­ment that im­poses ad­di­tional reg­u­la­tions on banks with at least $50 bil­lion in as­sets. Repub­li­cans want to raise the thresh­old to ex­clude re­gional lenders such as Hunt­ing­ton Na­tional Bank, Comer­ica and Zions Ban­cor­po­ra­tion.

Yellen said the Fed sup­ported a higher thresh­old, but she de­clined to spec­ify what the new num­ber should be.

Democrats have ex­pressed a will­ing­ness to re­duce the reg­u­la­tion of smaller banks, but they pressed back Thurs­day against any weak­en­ing in the rules for the largest banks.

“Lob­by­ists are us­ing the suc­cess of these re­forms as proof that they should now be gut­ted,” said Sen. Sher­rod Brown, D-Ohio. Re­fer­ring to Yellen’s former life as an eco­nom­ics pro­fes­sor, he added, “I’m sure that ev­ery col­lege stu­dent you taught in your long, dis­tin­guished aca­demic ca­reer who strug­gled in class would have wanted the same thing. But they, un­like our na­tion’s largest banks, would have been too em­bar­rassed to ask their pro­fes­sor.”

Sen. Eliz­a­beth War­ren, DMass., asked Yellen why the Fed had not re­moved mem­bers of Wells Fargo’s board after a scan­dal in­volv­ing the open­ing of fake cus­tomer ac­counts.

Yellen said the mat­ter re­mained un­der in­ves­ti­ga­tion.

“The be­hav­ior that we saw was egre­gious and un­ac­cept­able,” she said.

Sen­a­tors did take ad­van­tage of Yellen’s pres­ence to ex­plore some is­sues re­lated to the health of the econ­omy, in­clud­ing the slug­gish­ness of in­fla­tion and pro­duc­tiv­ity growth and the high level of the fed­eral debt.

A cou­ple of sen­a­tors ex­pressed par­tic­u­lar con­cern that the Trump ad­min­is­tra­tion’s trade pol­icy was al­ready weigh­ing on the U.S. econ­omy. Sen. Ben Sasse, R-Neb., asked Yellen to com­ment on a de­cline in sales of U.S. corn to Mex­ico.

“I’m go­ing to pass, if you don’t mind, on this ques­tion,” she re­sponded.

Sen. Heidi Heitkamp, DN.D., ex­pressed sim­i­lar con­cern about the im­pact on agri­cul­tural ex­ports. Yellen again de­clined to com­ment on the spe­cific is­sue. Heitkamp then asked if Yellen would at least agree that trade has been an im­por­tant en­gine of eco­nomic growth.

To this much, Yellen as­sented.

AP/PABLO MARTINEZ MONSIVAIS

“I be­lieve we have done a great deal since the fi­nan­cial cri­sis to strengthen the fi­nan­cial sys­tem and to make it more re­silient,” Fed­eral Re­serve Chair­man Janet Yellen told the Se­nate Bank­ing Com­mit­tee on Thurs­day.

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