Lawmakers reprimand Yellen on Wells Fargo and Fed's "politics"
Democrats and Republicans found reasons to raise their voices at the chair of the Federal Reserve on Wednesday, with Janet Yellen taking heat from lawmakers over issues including Wells Fargo’s bogus account scandal and whether the central bank is politically active.
Reps. Carolyn Maloney and Gregory Meeks, two New York Democrats on the House Financial Services Committee, which heard prepared testimony from Yellen, commended the Fed chair for maintaining a nonpartisan stance, despite some suggestions to the contrary.
While not naming Republican presidential nominee Donald Trump, Maloney said she was “disturbed to hear, whether in a recent debate, or anywhere, that Chair Yellen acts politically.”
In Monday night’s presidential debate with Democratic candidate HIllary Clinton, Trump declared that “the Fed is being more political than Secretary Clinton.” The assertion follows Trump’s previous allegation that the Fed is leaving interest rates low in order to make the economy under President Barack Obama look good.
New Jersey Republican Scott Garrett took a different tone with Yellen, telling her that whether she liked it or not, “the public believes the Fed’s independence is nothing more than a myth.”
Garrett went on to ask whether it was appropriate for Fed Governor Lael Brainard to donate to Hillary Clinton’s presidential campaign and wondered aloud whether Brainard was lobbying for a job in a Clinton administration.
Brainard, like all Fed members, is subject to the restrictions of the Hatch Act, which does not prohibit political contributions, Yellen replied, adding: “she’s acting in a way that is permitted by the rules.”
Democrats also lashed out, finding fault with the Fed in regards to Wells Fargo, offering a preview of what John Stumpf, the bank’s CEO, might hear when he appears before the House panel on Thursday.
“Two million accounts not detected by regulators, break them up,” California’s Brad Sherman told Yellen in calling on the Fed chair to use her authority to disband the bank, which earlier this month agreed to pay nearly $200 million to settle civil charges alleging its employees had set up debit and credit card accounts on behalf of unknowing customers.
“How long does this stuff go on, before the Fed gets outraged and you take action?” asked Gregory Meeks of Massachusetts, calling the fine paid by Wells Fargo “laughable,” given its overall profits.
“You know they are laughing at you,” he added.
“I think there is value in getting after them,” Massachusetts Democrat Stephen Lynch advised Yellen. “Just get after them and make their lives hell.”
The Fed is the primary regulator for Wells Fargo’s holding company, and is conducting a broad review of compliance issues at all large U.S. banking institutions, Yellen told lawmakers.
“It is very important that senior management be held accountable,” said Yellen, who noted “a distributing pattern of violations” involving a range of financial products at various institutions. “We are taking a comprehensible look at big banks.”
Wisconsin Republican Duffy questioned the effectiveness of regulation passed in the wake of the 2008 financial meltdown, asking Yellen whether having banks that are too big fail remains a problem.
“Too big to fail is a less significant problem than it was before,” said Yellen. “We’ve made very, very important and meaningful strides. I don’t think it’s a black or white thing.”
“With all the rules and regulation, and you can’t tell me that you haven’t eradicated too big to fail,” said Duffy, his voice raised. “Is it a failure of Dodd-Frank, or is it a failure of the Fed?”