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In June 2020, she argued that Congress had left gaping holes in the oversight of the activities of “shadow banks” – a term that refers to everything from asset managers and insurers to private equity firms. Those loopholes meant the Federal Reserve had to step in at the start of the coronavirus pandemic to prevent debt markets from collapsing as panicked investors in mutual funds and other companies pulled money out.
“There are really problems here in the powers created by Dodd-Frank, and we have seen everything explode except for the intervention of the Fed which saved us from a financial crisis,” she said. said at an event hosted by the Brookings Institution, where he is a distinguished man. “Personally, I think we need a new Dodd-Frank.”
While such statements can create a potential clash with Wall Street if confirmed in the Treasury position, Yellen – a former Fed chairman – is not an enemy of finance. Still, those comments, along with her track record as a banking regulator, help explain why many Democrats believe she won’t be beholden to financial interests.
“People in the public and private sectors seek his wisdom and trust his expertise because of his transparency and deep knowledge of the issues,” said Senator Sherrod Brown (D-Ohio), one of the top critics. virulent Wall Street congressmen who are set to chair the banking committee, POLITICO told POLITICO. “She’s the kind of public servant we need, and I thank her for coming back to the public service at the height of another crisis.
After his revelations were released, Jeff Hauser, director of the progressive Revolving Door project, tweeted that talking money “creates a personal affection and connection with businesses that Yellen will now be looking at.” But even tells him he’s not too bothered by it.
If “Yellen has been giving speeches on the history of war for a lot of money, it’s unfortunate given his new role, but it’s not a big deal,” Hauser said, while adding that she should still make all her remarks public. “No one thought they were buying access to a future regulator, and no-secret war stories are very different from selling public service-based policy advice.
Yellen’s remarks at several of these events are not available, but in public speeches to some financial firms, she had other warnings for US firms.
At an event hosted in February 2019 by the Structured Finance Association, a financial lobbying group then called the Structured Finance Industry Group, Yellen warned of rising non-financial corporate debt, according to a Reuters report. at the time. She revealed that she received $ 180,000 for her appearance.
“What I would worry about is if the economy does experience a downturn, we could see a lot of business distress,” she reportedly said. “If companies are in distress, they lay off workers and reduce their capital spending. And I think it’s something that could make the next recession a deeper recession.
The speech fees disclosed by Yellen during the holidays included more than $ 700,000 she received from Citadel, a hedge fund also affiliated with a broker-dealer, for four different engagements in 2019 and 2020, as well as another paid event. in 2018, for which the amount is not disclosed because it did not fall within the reporting period. She received around $ 1 million from Citigroup, one of the country’s largest banks, for nine different conferences.
She spoke to other large companies, such as Bank of America, Goldman Sachs, Credit Suisse, PIMCO, Google and Salesforce.
Much discussion has centered on his views of the economy, where the risks might lie, how the Fed might react to these dynamics, and comments on long-term issues.
“I see that the main driver of the trade war is economic,” she said at a CEO summit hosted by ING, according to a flagship video posted by the company, which paid her $ 225,000, according to disclosure. “It is about the stagnation of the standard of living and it has created a feeling of hopelessness.”
Yellen pledged to approach the ethics attorneys of the Treasury to “seek written permission to participate personally and substantially in any particular matter” that involves a company from which she received compensation the previous year.
Other Senate Democrats have defended her, suggesting they don’t view the payments as disqualifying, even though other appointees have been criticized for more direct financial ties to the companies. Hillary Clinton took heat during the 2016 presidential campaign – even many Democrats – for taking money from banks for conferences.
Senator Ron Wyden (D-Ore.), Who will chair the Finance Committee, which has jurisdiction after Yellen’s confirmation, pointed out that she had spoken in a series of forums, paid and unpaid, since leaving the Federal Reserve in early 2018. “She has been completely transparent,” Wyden said.
Senator Elizabeth Warren (D-Mass.), Who recommended Yellen to Biden’s camp, had a more critical take – but barely. An aide to the senator said Warren “doesn’t think she should have made these speeches, but based on Yellen’s record of resisting large financial institutions, she supports her nomination.”
Hedge funds are among the large financial institutions Yellen dealt with in his remarks.
In her remarks at the June Brookings event, she said the stress in the financial market in March showed that the risks posed by hedge fund debt-fueled investments “are very real and serious,” although it did not directly call them responsible for the market crisis.. Current regulators have said they would like more information on this front.
The Managed Funds Association, which represents hedge funds, said these companies “weathered the market turmoil in March without posing systemic risk to the financial system,” but added that they support the search for reform of the market. structure of US government debt markets.
Yelen said last year’s financial explosion should be a priority. “We have seen a financial system that has not reacted resiliently to stresses, which makes business unfinished in the current crisis, and reasons to worry about the stability of the financial system,” she said. declared at another event, organized by the Institute. Montaigne, that same month.
One of its solutions: give more power to the Financial Stability Oversight Council, a panel of financial regulators chaired by the Secretary of the Treasury.
This advice, which she would lead in her new role, was designed at Dodd-Frank to address some of those gaps, including identifying large companies that, if failed, could threaten the entire financial system and thus deserve stricter regulations. . But she argued that the body had been “completely sterilized”, both by the law itself and by a lawsuit brought by MetLife that the Trump administration had refused to appeal.
“We need to change the structure of the FSOC and strengthen its powers to be able to deal more effectively with all the problems that exist in shadow banking,” Yellen told Brookings.
She also said that agencies like the Securities and Exchange Commission, which is responsible for keeping markets running smoothly, should be given an explicit mandate to help prevent financial crises.
The need for increased financial regulation was raised during a meeting between Yellen, its future MP Wally Adeyemo, and Americans for Financial Reform, a progressive watchdog group.
Adeyemo “underlined the commitment of the new administration to restore and rebuild regulatory and consumer protection mechanisms and institutions, including the [Consumer Financial Protection Bureau] and FSOC, ”according to an official reading from Biden’s transition team.
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