Federal Reserve Chair Janet Yellen, in response to a warning from a US congressman to halt global regulatory talks in the early stages of Donald Trump’s presidency, said in a letter the Fed has the authority and responsibility to consult with its foreign counterparts and does so to benefit the US.
The pointed letter to Republican representative Patrick McHenry, reviewed by Reuters, suggested the US central bank will carry on as usual with international discussions on financial standards even while Trump and conservatives in Congress move to ease US bank rules adopted after the 2007-2009 financial crisis.
“We will continue to coordinate with the Treasury Department, which is itself a member of several international forums related to financial services, such as the Financial Stability Board (FSB) and the International Association of Insurance Supervisors, as well as with the other US supervisory agencies that participate in various international forums,” Yellen wrote in a February 10 letter to McHenry, who is vice chairman of the House Financial Services Committee.
“In exercising our longstanding authorities and responsibilities for consulting with our foreign counterparts, we share the objective that the whole US government must work constructively to ensure a strong, stable US economy and financial system,” she added.
A clash over the Fed’s authority to engage in global talks on capital standards, for example, could antagonise the US central bank’s already testy relationship with Republicans who have criticised its efforts to bulk up financial regulations and keep interest rates low since the crisis and recession.
Yellen on Tuesday began two days of congressional testimony, her first since Republicans took control of the White House and both houses of the legislature. She faced a Senate panel on Tuesday and the House panel yesterday.
In an unusual January 31 letter to Yellen, the congressman from North Carolina said the Fed “must cease all attempts to negotiate binding standards burdening American business until President Trump has had an opportunity to nominate and appoint officials that prioritise America’s best interests.”
The Fed operates independently from Congress and the White House even while lawmakers oversee it. Fed officials such as Governor Daniel Tarullo, who announced last week he would retire in April, often participate in forums including the Basel Committee on Banking Supervision and the FSB.
While Trump and other Republicans have set out to repeal many post-crisis reforms meant to rein in risk-taking by big banks and other firms, Fed policymakers and many Democrats have warned about going too far.