The U.S. Federal Reserve’s annual economic symposium has begun, with a reception dinner last night and Fed Chair Janet Yellen’s speech this morning.
In her speech to central bankers assembled at Jackson Hole, Yellen spoke about why the Fed put regulations in place following the 2008 financial crisis.
She began by saying, “A decade has passed since the beginnings of a global financial crisis […] Already, for some, memories of this experience may be fading — memories of just how costly the financial crisis was and of why certain steps were taken in response.” She stressed that the the reforms policymakers have made were “to limit both the probability and the adverse consequences of future financial crises.”
Yellen cited measures like the Dodd-Frank Act and the requirement for banks to submit living wills to address bankruptcy. She noted that, while the Fed will evaluate the effects of regulations and consider “appropriate adjustments,” the steps taken “promote market discipline, as creditors — knowing full well that they will bear losses in the event of distress — demand prudent risk-taking, thereby limiting the problem of too-big-to-fail.”
But Yellen refrained from remarking on the state of the economy, the current administration or the possible future course of interest rates, reports The Associated Press.
Her closing remarks were cautiously optimistic. If the effects of the financial crisis are remembered and reflected upon, leading to continued and careful evolution of the financial system, then “we have reason to hope that the financial system and economy will experience fewer crises and recover from any future crisis more quickly,” says Yellen.
As Sam Fleming of Financial Times reports, Yellen’s address “comes in the face of mounting calls for a loosening of financial regulation from Republicans concerned that the regime is stifling growth.” In June, Fleming writes, a lengthy U.S. Treasury report recommended revisiting how banks are stress-tested, the global capital and liquidity standards for large U.S. lenders and the Volcker ban on banks. Read more.