Yellen wor­ries about im­pact if rule roll­backs en­acted

The Denver Post - - BUSINESS - By Jim Puz­zanghera

WASH­ING­TON» Fed­eral Re­serve Chair­woman Janet Yellen told sen­a­tors Thurs­day the risk of an­other fi­nan­cial cri­sis would in­crease if some Trump ad­min­is­tra­tion pro­pos­als to roll back reg­u­la­tions were en­acted.

In her sec­ond straight day of Capi­tol Hill tes­ti­mony, she walked back her state­ment last month that she didn’t ex­pect an­other fi­nan­cial cri­sis “in our life­times.”

“I think we can never be con­fi­dent there won’t be an­other fi­nan­cial cri­sis,” Yellen told mem­bers of the Se­nate Bank­ing Com­mit­tee.

The U.S. has “done a great deal” since the 2008 cri­sis to strengthen the fi­nan­cial sys­tem, she said. That in­cludes forc­ing banks to hold more cap­i­tal to cover po­ten­tial losses as part of the 2010 Dodd-Frank fi­nan­cial reg­u­la­tory over­haul law.

“It is im­por­tant that we main­tain the im­prove­ments that have been put in place that mit­i­gate the risk and the po­ten­tial dam­age,” Yellen said.

Pres­i­dent Don­ald Trump has promised to dis­man­tle Dodd-Frank, which Repub­li­cans have said has been too bur­den­some for banks.

In a re­port last month or­dered by Trump, Trea­sury Sec­re­tary Steven T. Mnuchin pro­posed sweep­ing reg­u­la­tory re­duc­tions, in­clud­ing changes that would re­duce cap­i­tal re­quire­ments for the big­gest banks.

Yellen said she would not fa­vor re­duc­ing those cap­i­tal re­quire­ments.

Sen. Sher­rod Brown, D-Ohio, pressed her on whether adopt­ing the Trea­sury re­port rec­om­men­da­tions “would more likely re­sult in a po­ten­tial fi­nan­cial cri­sis.” “Well, some of them, yes,” Yellen said. She said that she agreed with “a lot of things in the Trea­sury re­port” that are sim­i­lar to Fed ef­forts to tai­lor reg­u­la­tions so they are not so bur­den­some for smaller banks.

The Repub­li­can-con­trolled House voted last month along party lines to re­peal many of the Dodd-Frank reg­u­la­tions.

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