Yellen Defends Regulation Role in Bolstering Financial Stability

(Bloomberg) -- US Treasury Secretary Janet Yellen defended the role of regulation in supporting a resilient financial system as she touted her department’s focus over the past few years on securing stability.

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“A resilient financial system is critical to a strong economy,” Yellen said in remarks prepared for delivery Thursday, excerpts of which were released by the Treasury. “And strengthening it requires insisting on thoughtful regulation, including in the face of challenges from those who advocate to roll back policies and regulations.”

Her comments, delivered less than two months before the US presidential election, took aim at the state of financial monitoring at the end of Donald Trump’s term.

Yellen said the Treasury’s focus on financial stability “had all but disappeared” when she took the helm in 2021. In remarks to be delivered to the US Treasury Market Conference in New York, she also objected to arguments that the Dodd-Frank Act passed after the great financial crisis would hold back innovation and growth.

“I and many others have insisted on the opposite: Appropriate regulation is critical to supporting a resilient financial system that serves as an engine for innovation and growth,” Yellen said.

Capital Rules

Critics’ warnings that regulation would undermine the competitiveness of US banks didn’t come to pass, Yellen said.

Instead, she argued, reforms have strengthened the financial system, “including by equipping banks with substantially more and higher-quality capital that made them better positioned to extend credit to households and businesses that needed it during the pandemic.”

Yellen also outlined the work her department has done to bolster financial stability including through its Treasury market operations and its response to the regional banking stress in the spring of 2023.

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