Treasury Secretary Janet Yellen on Thursday will tell economists that there is more work to be done to protect the stability of the financial system in the wake of the failures of two banks.
In remarks prepared for a meeting of the National Association for Business Economics, Yellen will hail progress made over the past 15 years on safeguarding financial stability but will also suggest that stricter banking rules are necessary.
“Recent events show that, clearly, our work is not done. During the COVID pandemic and again this month, the proverbial fire department had to be called — in the form of interventions by the Fed, FDIC and Treasury,” Yellen will say, according to her prepared remarks. Regulators earlier this month protected all depositors at the failed Silicon Valley Bank and Signature Bank of New York.
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“These events remind us of the urgent need to complete unfinished business: to finalize post-crisis reforms, consider whether deregulation may have gone too far and repair the cracks in the regulatory perimeter that the recent shocks have revealed. We must also address new areas of risk,” Yellen plans to say.
Yellen is scheduled to speak at the meeting Thursday afternoon.
Her remarks come as the White House is reportedly preparing to call for federal banking regulators to impose new rules on midsize banks. The Washington Post reported that it appears unlikely, however, that the Biden administration will soon ask Congress to undo a bipartisan deregulation law.
The Wall Street Journal reported that White House is expected to recommend new rules from the Federal Reserve and other agencies, including for banks with $100 billion to $250 billion in assets. The Fed, as the Journal writes, is already rethinking rules related to those banks. Options include tougher capital and liquidity requirements.
“Anytime a bank fails, it is cause for serious concern,” Yellen will say. “Regulatory requirements have been loosened in recent years. I believe it is appropriate to assess the impact of these deregulatory decisions and take any necessary actions in response.”
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