Yellen rejects Trump’s regulatory approach

by Ryan Smith28 Aug 2017
The chair of the Federal Reserve forcefully defended the post-crisis regulatory regime Friday – a rejection of President Donald Trump’s assertions that financial regulations need to be dramatically scaled back.

Yellen defended the current regulatory regime in a speech before a banking industry group, saying that she believed that post-2008 regulatory frameworks like Dodd-Frank have improved the country’s financial system, the Washington Post reported.

“The evidence shows that reforms since the crisis have made the financial system substantially safer,” she said.

Yellen’s speech comes as Trump considers whether to reappoint her for another four-year term as Fed chair when her tenure is up in 2018. Trump has praised her cautious approach to raising interest rates, the Post reported. However, Yellen’s praise of a regulatory regime that Trump abhors could put a dent in her chances for reappointment.

Trump has said that the sweeping regulations enacted in the wake of the 2008 financial crisis have been a “disaster,” making it difficult for consumers and businesses to get access to credit and strangling economic growth. One of his arguments has been that regulations requiring banks to hold bigger capital cushions against losses make the less apt to lend money, the Post reported.

Yellen said that Fed officials believed that there were “sizable net benefits to economic growth from higher capital standards.” However, she did acknowledge that the current regulatory regime made it harder for some borrowers – especially prospective homebuyers – to access loans.

“While material adverse effects of capital regulation on broad measures of lending are not readily apparent, credit may be less available to some borrowers – especially homebuyers with less-than-perfect credit histories and, perhaps, small businesses,” she said.

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