Magazine article American Banker

Yellen Treads Cautiously on 'Too Big to Fail'

Magazine article American Banker

Yellen Treads Cautiously on 'Too Big to Fail'

Article excerpt

Byline: Donna Borak

WASHINGTON -- It took a few hours for lawmakers to ask the perennial question to Federal Reserve Board Chair Janet Yellen that is apparently required for every regulator testifying on Capitol Hill: Did the Dodd-Frank Act end "too big to fail"?

Yellen's answer in a nutshell -- hopefully -- was in keeping with what her predecessor Ben Bernanke said in the past.

"We have a broad program that's designed to deal with 'too big to fail.' It's the Dodd-Frank program," said Yellen, who appeared before the House Financial Services Committee on Tuesday to testify on the Fed's semiannual monetary policy report to Congress. "I'm very hopeful that this is going to effectively deal with it. We will monitor as we go forward if more needs to be done."

During his final press conference, Bernanke left the door ajar that further regulations could be needed in order to keep the financial system safe.

"Whether more needs to be done I leave that as an open question," said Bernanke. "I think we will be working on this for some time."

Regulators have consistently described financial reform as a moving target, and a job that will never quite be completed. Treasury Secretary Jack Lew summed it up late last year by saying that regulators will definitively show that "too big to fail" is over when another financial crisis occurs. But he added one caveat.

"There is no precise point at which you can prove with certainty that we have done enough," said Lew, in a December 5 speech. …

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