In June 2020, she argued that Congress had left gaps in overseeing the activities of ‘shadow banks’ – a term that refers to everything from asset managers and insurers to private equity firms. These shortcomings meant that the Federal Reserve had to intervene with the start of the coronavirus pandemic to prevent debt markets from disintegrating, while panicked investors in mutual funds and other businesses withdrew money.
“There are really problems here in the forces that Dodd-Frank has created, and we have seen how it all blew up, except for the intervention of the Fed that saved us from a financial crisis,” she said during a opportunity hosted by the Brookings Institution, where she is a prominent fellow. “I personally think we need a new Dodd-Frank.”
While such statements could lead to a potential clash with Wall Street if she is confirmed for the treasury post, Yellen – a former Fed chairman – is no enemy of finance. These comments, as well as her record as a bank regulator, nevertheless help to explain why many Democrats are confident that she will not like financial interests.
“People from the public and private sectors seek her wisdom and trust her expertise because of her transparency and in-depth knowledge of the issues,” said sen. Sherrod Brown (D-Ohio), one of the toughest critics on Wall Street, who is poised to chair the banking committee, told POLITICO. “She’s the kind of civil servant we need, and I thank her for returning to public service at the height of another crisis.”
After her revelations were announced, Jeff Hauser, director of the progressive Revolving Door Project, tweeted that the proceeds would “investigate personal affection and affiliation with the firm Yellen.” But even he says he does not care too much about it.
If ‘Yellen held war story speeches for big cash, it’s unfortunately given her new role, but not a giant deal,’ “Hauser said, though he added that she still had to make all her remarks public. ‘Nobody thought they were buying access to a future regulator, and war stories without secrets are very different from selling strategic advice on public service. ”
Yellen’s comments on many of these opportunities are not available, but in public speeches to some financial firms, she had other warnings for American business life.
At a meeting in February 2019 hosted by the Structured Finance Association, a financial lobby group then called the Structured Finance Industry Group, Yellen warned about the balloon debt among non-financial corporations, according to a then-Reuters report. She revealed that she received $ 180,000 for her appearance.
“What I worry about is that if we experience a downturn in the economy, we can see a lot of corporate distress,” she said. “When companies are in distress, they lay off workers and cut their investment spending. And I think that’s something that could make the next recession a deeper recession. ”
The speaking fees Yellen made during the holidays included more than $ 700,000 she received from Citadel, a hedge fund also linked to a broker, for four different commitments in 2019 and 2020, as well as another paid event in 2018, for which the amount is not disclosed because it does not fall within the reporting period. She received about $ 1 million from Citigroup, one of the largest banks in the country, for nine different talk events.
She has spoken to other major companies, such as Bank of America, Goldman Sachs, Credit Suisse, PIMCO, Google and Salesforce.
Many of the talks focused on her view of the economy, where the risks may lie, how the Fed might react to the dynamics, and comment on long-term problems.
“I see the key driver of the trade war being economical,” she said during an executive conference hosted by ING, according to a high-profile video posted by the company, which reportedly paid $ 225,000. “It’s about stagnation of living standards and it has created a sense of despair.”
Yellen promised to go to the ethics advocates of the Treasury to ‘ask for written permission to participate personally and materially in a specific matter’ involving a firm for which she had received compensation the previous year.
Other Senate Democrats defended her, suggesting they did not disqualify the payments, even because other nominees had been criticized for more direct financial ties with corporations. Hillary Clinton became famous during the 2016 presidential campaign – even of many Democrats – for taking money from banks for speaking engagements.
Sen. Ron Wyden (D-Ore.), Who will chair the Finance Committee, which has jurisdiction about Yellen’s confirmation, emphasizes that she has spoken in a variety of forums, both paid and unpaid, since leaving the Federal Reserve in early 2018. “She was completely transparent,” Wyden said.
Sen. Elizabeth (D-Mass.), Who recommended Yellen in the Biden camp, had a more critical attitude – but only rarely. A senator’s assistant said Warren “does not think she should have given these speeches, but based on the balance between Yellen’s record of standing against the major financial institutions, she supports her nomination.”
Hedge funds are among the major financial institutions that Yellen handled in her comments.
In comments during the Brookings event in June, she said that the financial market stress in March showed that the risks posed by hedge funds’ debt-driven investments were ‘very real and serious’, although she did not directly hold them responsible for using the market. do not stamp.. Current regulators have said they want more information on this front.
The Managed Funds Association, which represents hedge funds, said such companies “endured the turmoil in March without posing a systematic risk to the financial system”, but added that they were investigating reforms to the structure of the US government debt markets.
Yelen said the financial explosion last year should be a top focus. “We have seen a financial system that is not responding in a resilient way to the tensions, causing unfinished business in the current crisis, and reasons to be concerned about the stability of the financial system,” she said during another event, presented by Institut Montaigne, the same month.
One of her solutions: give more power to the Financial Stability Supervision Board, a panel of financial regulators chaired by the Treasury Secretary.
The advice, which she would lead in her new role, was designed in Dodd-Frank to fill in some of these gaps, among other things by identifying large companies that would threaten the entire financial system and thus deserve stricter regulation. . But she argued that the body was “completely sterilized,” both by the law itself and by litigation by MetLife, that the Trump administration refused to appeal.
“We need to change the structure of FSOC and build its powers to deal with all the problems in the shadow banking sector more effectively,” Yellen told Brookings.
She also said agencies such as the Securities and Exchange Commission, which has the task of ensuring that markets function properly and fairly, should be given an explicit mandate to prevent financial crises.
The need to increase financial regulation arises during a meeting between Yellen, her soon-to-be Deputy Wally Adeyemo, and Americans for Financial Reform, a thriving watchdog group.
Adeyemo “emphasizes the incoming government’s commitment to restoring and rebuilding regulatory and consumer protection mechanisms and institutions, including the [Consumer Financial Protection Bureau] and FSOC, ”according to an official reading from the Biden transition team.