Yellen worries about impact if rule rollbacks enacted
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.