As Fed chair, Yellen unlikely to let big banks off the hook

Thu Oct 10, 2013 10:59am EDT
 
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By Emily Stephenson

WASHINGTON (Reuters) - Big banks hoping for a break from the U.S. Federal Reserve's tough line on regulation will be disappointed by Janet Yellen, President Barack Obama's choice to lead the central bank.

Yellen's primary focus will likely be monetary policy and getting Americans back to work, banking experts said, but she is not expected to divert the Fed from its current course of insisting on robust bank capital levels and risk reduction.

Yellen's nomination was "a dark cloud for the largest U.S. banks hoping for a reprieve from tough new rules," Karen Shaw Petrou of Federal Financial Analytics, a consulting firm, said in a note to clients on Wednesday.

"Yellen supports much of what the Fed has been doing with regard to the very tough rules," Petrou said in an interview.

Yellen has been portrayed as a tougher steward of big banks than former Treasury Secretary Larry Summers, who was said to be Obama's first choice to lead the Fed. He withdrew from the running in September after Senate Democrats raised concerns that Summers would be soft on Wall Street, and they instead publicly backed Yellen.

If confirmed by the U.S. Senate, Yellen would be the first woman to serve as head of the Fed. She would take over from Chairman Ben Bernanke at a time when the agency faces a number of tricky issues that go well beyond monetary policy.

The Fed is tackling a laundry list of new rules for banks after the financial crisis, many of which were called for by the 2010 Dodd-Frank Wall Street reform law and some that go beyond those prescribed rules.

Regulators are finalizing capital requirements for the biggest banks that are tougher than a globally agreed-upon framework, a ban on proprietary trading known as the Volcker rule, and plans for how to handle giant failing banks in a crisis.   Continued...

 
U.S. President Barack Obama (L) shakes hands with Janet Yellen (R) after announcing her nomination to head the Federal Reserve at the White House in Washington October 9, 2013. REUTERS/Jonathan Ernst