Janet Yellen issued a defense of the post-crisis banking rules on Friday, and dismissed the idea put forward by the Trump administration that those regulations are slowing growth.
“The core reforms we have put in place have substantially boosted resilience without unduly limiting credit availability or economic growth,” Yellen said in her speech. In her address, she contrasted the rules of today with the relative lack of oversight when the financial system nearly collapsed in 2008.
Yellen acknowledged that some small businesses with low credit scores or no credit histories might face difficulties getting loans, but said, “credit appears broadly available to small businesses with solid credit histories.” She also chalked up the the difficulties that some people have in getting approved for mortgages to market factors, rather than government regulations.
Yellen’s comments, delivered in a speech at an annual gathering of central bankers in Jackson Hole, Wyo., will likely raise questions about her future as chair of the Federal Reserve, given President Trump’s desire to lessen the burden of many of the bank rules through administrative action that would revolve around the central bank.
In comparison, White House officials like Gary Cohn, Trump’s economic adviser, have claimed that the new regulations have stifled lending, especially by community banks. Trump has said that Cohn is a potential candidate to replace Yellen, and has also entertained the idea of reappointing Yellen, whose term ends in February.
Trump-appointed bank regulators have already kicked off procedures to rethink one of the biggest planks of the 2010 Dodd-Frank reform law, namely the “Volcker Rule” that prevents banks from speculating for profit with deposits insured by the federal government.
Yellen, though, said Friday that the Volcker Rule has made big banks more resilient, and that any changes should be “modest.”
This month, the Fed’s leadership has been particularly vocal in warning Trump and Republicans against loosening bank regulations. Stanley Fischer, the central bank’s vice chairman, said that the move to ease rules for big banks was “very, very dangerous.”
Both Fischer and Yellen were appointed by Obama. In his first term, Trump could replace them with officials friendlier to his agenda if he chooses.
