Treasury Secretary Janet Yellen speaks at the Council on Foreign Relations in New York City, US on October 17, 2024.
Andrew Kelly | Reuters
US Treasury Secretary Janet Yellen on Friday urged the incoming Trump administration to refrain from interfering in what she called critically important proper regulation of US banks' capital levels, liquidity and risk.
Yellen, who has served as Treasury Secretary under US President Joe Biden since he took office in January 2021, said that the current American oversight system is not ideal, and it is legitimate to look for ways to reduce the regulatory burden on it.
But it warned against taking radical steps that would conflict with the necessary supervision or the current system of bank deposit insurance, given the long history of bank failure that led to financial crises.
“I don't want to say that what we have in particular is absolutely sacred and untouchable,” Yellen told Reuters as she prepared for the delivery. “But I don't think it's broken. We have a good system.” To Scott Besent, President-elect Donald Trump's nominee for Treasury Secretary.
Trump's return to office has raised the prospect of radical changes to the current structure of the federal government and the regulatory framework that has been in place over decades to oversee financial and banking services, as well as digital currency.
“Bankers always complain about over-regulation,” Yellen said. “It is legitimate to look for areas where the burdens of regulation exceed the benefits and try to address that. But proper regulation of capital, liquidity, risk and the like is critical to a healthy banking system and economy, and that should not happen.” is being interfered with.”
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Yellen said she was troubled by a report that Trump's transition team is exploring ways to reduce, merge or even eliminate top banking regulators in Washington, but she had no specific idea of their plans.
“We have seen what happens when banks are inappropriately supervised,” she said, referring to the unexpected failures of Silicon Valley Bank and Signature Bank in March 2023, and others before them that “created the potential for a contagious financial crisis.”
“The lessons we have learned from those 100 years of history are that banks need to be appropriately supervised and regulated to greatly mitigate the likelihood of failure; and that deposit insurance is a critical element in promoting safety, soundness and confidence in the system,” she said. “There must be adequate access.” For liquidity when banks face problems.
Financial stability
Yellen said US banks were performing “exceptionally well” despite warnings that the Dodd-Frank law passed after the 2008-2009 global financial crisis would make it difficult for them to compete.
The legislation created 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 Fed from 2014 to 2018, agreed that the United States has a complex system of banking regulation that includes numerous agencies at the state and federal levels. She said there have been discussions over the years about potential consolidation steps at the federal level, and the Office of Thrift Supervision was abolished after the global financial crisis with no negative impact.
But she added that changing the structure of the system was not at the top of her agenda.
