Treasury Secretary Janet Yellen says the next administration should leave “critically important” financial regulations untouched.
In an interview with Reuters on Friday (Dec. 13), Yellen said these regulations govern things like banks’ capital levels, liquidity and risk-taking.
She said the current system has its flaws and the incoming Trump administration would have cause to seek ways to ease regulatory burdens. However, Yellen warned against radical changes to things like the insurance of bank deposits, considering the long history of banking failures leading to financial crises.
“I don’t want to say that exactly what we have is utterly sacrosanct and couldn’t possibly be touched. But I do not think it’s broken. We’ve got a good system,” Yellen said.
As the Reuters report noted, Trump’s next administration could bring with it sweeping changes to the current financial regulation system, from banking to financial services to digital currency.
“Bankers always complain about over-regulation,” Yellen said. “It’s legitimate to look for areas where the burdens of regulation exceed the benefits and to try to redress that. But appropriate regulation of capital, liquidity, risk taking and the like are critically important to a sound banking system and economy, and that should not be interfered with.”
Yellen added she was concerned by a report that Trump’s transition team was looking into ways to reduce, merge, or even eliminate the major bank regulators in Washington, though she had no specific insight into their designs.
“We’ve seen what happens when banks are inappropriately supervised,” she said, referencing the unexpected failures of Silicon Valley Bank and Signature Bank in March 2023, and others before them that had “created the possibility of a contagious financial crisis.”
As reported here Sunday (Dec. 15), the Trump camp’s approach to regulation has apparently made it hard to find candidates to oversee those regulatory agencies, with increasing calls to consolidate some of the duties of the Federal Reserve, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC).
A recent Financial Times report said that some potential candidates have been interviewed by Elon Musk and Vivek Ramaswamy, heads of Trump’s new Department of Government Efficiency, who inquired about streamlining regulation.
Musk has proposed doing away with the CFPB, while Ramaswamy argued recently on social media that the bureau would be “one of the easiest agencies to shut down.”
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