Fed chief Yellen calls for 'modest' reform changes in potentially final speech

By Ed Adamczyk  |  Aug. 25, 2017 at 10:55 AM
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Aug. 25 (UPI) -- In what may have been her last speech as chief of the Federal Reserve, Janet Yellen said Friday that any rollbacks of financial reforms should be modest.

The Fed chairwoman spoke at the central bank's annual monetary policy conference in Jackson Hole, Wyo., on the effectiveness of regulatory policy and reforms that followed the 2007-09 financial crisis.

Yellen noted that, a decade ago, the U.S. financial system was "a dangerous place" -- citing a peak in the price of housing and strains caused by the subprime mortgage market, which led to the deterioration of money markets and the imposition of new regulations on banks.

Today, she said, things are much improved and more capable of holding off a similar crisis in the future.

"Our more resilient financial system is better prepared to absorb, rather than amplify, adverse shocks, as has been illustrated during periods of market turbulence in recent years. Enhanced resilience supports the ability of banks and other financial institutions to lend, thereby supporting economic growth through good times and bad," she said, calling for only limited adjustments to the Fed's regulatory framework. She added that economic research indicates that "reforms have made the system safer."

"Any adjustments to the regulatory framework should be modest and preserve the increase in resilience at large dealers and banks associated with the reforms put in place in recent years," she continued. "The balance of research suggests that the core reforms we have put in place have substantially boosted resilience without unduly limiting credit availability or economic growth. But many reforms have been implemented only fairly recently, markets continue to adjust, and research remains limited."

Her comments conflict with the deregulation policies sought by President Donald Trump.

Trump, in his presidential campaign and during his administration, has blamed the 2010 Dodd-Frank Act -- which increases financial transparency in Wall Street regulation and consumer protection -- for inhibiting economic growth.

Yellen's speech could be her final address as Fed chairwoman. Her term ends in February and Trump has indicated he will not reappoint her.

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