Treasury Secretary Janet Yellen speaks before the Council on Foreign Relations on October 17, 2024 in New York City.
Andrew Kelly | Reuters
U.S. Treasury Secretary Janet Yellen on Friday urged the incoming Trump administration not to interfere with appropriate regulations that she said are critical to U.S. banks’ capital levels, liquidity and risk-taking.
Yellen, who has served as U.S. President Joe Biden’s Treasury Secretary since taking office in January 2021, said that the current U.S. regulatory system is not perfect and it is reasonable to find ways to reduce its regulatory burden.
But she warned against taking drastic measures that would interfere with necessary supervision or existing bank deposit insurance systems, given the long history of bank failures triggering financial crises.
“I don’t want to say that what we have is completely sacrosanct and cannot be touched. But I don’t think it’s been compromised. We have a great system,” Yellen told Reuters as she prepared for the transition. Bessent Donald Trump’s Nominated as Finance Minister.
Trump’s return to office raises the possibility of sweeping changes to the current structure of the federal government and the decades-old regulatory framework that oversees financial services and banks, as well as digital currencies.
“Bankers always complain about overregulation,” Yellen said. “It is reasonable to look for areas where regulatory burdens exceed benefits and try to correct this. But appropriate regulation of capital, liquidity, risk-taking, etc. is critical to a sound banking system and economy, and this should not be disrupted.”
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Yellen said she was troubled by: Report Trump’s transition team is exploring ways to reduce, consolidate or even eliminate Washington’s top banking regulators, but has no concrete idea of their plans.
“We’ve seen what happens when banks are improperly regulated,” she said, referring to the unexpected collapses of Silicon Valley Bank and Signature Bank in March 2023 and other banks before them that “created a contagious financial crisis.” the possibility of crisis”.
“The lessons we have learned from more than a hundred years of history are that banks need to be properly supervised and regulated to significantly reduce the likelihood of failure; deposit insurance is a key factor in promoting safety, soundness and confidence in the system, and when banks fall into In times of trouble, you need to have enough liquidity,” she said.
financial stability
Yellen said U.S. banks have performed “exceptionally well” despite warnings that Dodd-Frank, passed after the 2008-2009 global financial crisis, would make it difficult for them to compete.
The legislation resulted in the creation of the Financial Stability Oversight Council, the Federal Reserve’s Financial Stability Division, and the Treasury Department’s Office of Financial Research to anticipate and assess threats to financial stability.
Yellen, who led the Federal Reserve from 2014 to 2018, also believes that the United States has a complex banking regulatory system involving many agencies at the state and federal levels. She said possible consolidation action at the federal level had been discussed for years and the Office of Savings Supervision was abolished in the wake of the global financial crisis without any adverse impact.
But she added that changing the structure of the system is not at the top of her agenda.
