Exclusive: Yellen brushes off warning, says Fed has authority on global talks

Tue Feb 14, 2017 1:22pm EST
 
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By Jonathan Spicer

NEW YORK (Reuters) - Federal Reserve Chair Janet Yellen, in response to a warning from a U.S. 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 United States.

The pointed letter to Republican Representative Patrick McHenry, reviewed by Reuters, suggested the U.S. central bank will carry on as usual with international discussions on financial standards even while Trump and conservatives in Congress move to ease U.S. 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 U.S. supervisory agencies that participate in various international forums," Yellen wrote in a Feb. 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 U.S. government must work constructively to ensure a strong, stable U.S. economy and financial system," she added.

A clash over the Fed's authority to engage in global talks on capital standards, for example, could antagonize the U.S. central bank's already testy relationship with Republicans who have criticized 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 faces a Senate panel on Tuesday and the House panel on Wednesday, when McHenry could again question the Fed's participation in global forums.

In an unusual Jan. 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 prioritize 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.   Continued...

 
Federal Reserve Chair Janet Yellen prepares to speak before a Senate Banking, Housing, and Urban Affairs Committee hearing on the “Semiannual Monetary Policy Report to the Congress” on Capitol Hill in Washington, U.S., February 14, 2017.      REUTERS/Joshua Roberts