Janet Yellen, the country’s top central banker, is taking back her prediction that another financial crisis couldn’t possibly hit American families “in our lifetime.”
The Federal Reserve chairwoman, who was testifying on Capitol Hill before the Senate Banking Committee Thursday, said she should have been more careful two weeks ago in London when she suggested that she didn’t believe there would be another financial crisis in the decades to come.
“What I should have stated originally when I made that comment, I believe we have done a great deal since the financial crisis to strengthen the system and to make it more resilient,” said Yellen during an exchange with Senator Sherrod Brown, the top Democrat on the panel.
“We can never be confident that there won’t be another financial crisis,” she added.
Yellen’s comments in London sparked fears among Democrats, who worried her remarks would accelerate the GOP’s efforts to roll back post-crisis financial regulations under the 2010 Dodd-Frank Act.
Instead, Yellen stressed that it is necessary to preserve the financial system’s guardrails, which have given regulators greater confidence that banks could withstand a significant downturn in the U.S. economy.
“It’s important that we maintain the improvements that have been put in place that mitigate the risk and the potential damage,” said Yellen.
So far, the Fed chair has offered lukewarm reviews of recommendations made by Treasury Secretary Steven Mnuchin in a regulatory review report his agency released in June. She’s said that certain policies proposed in the report mirror efforts currently being made by the Federal Reserve to tailor regulations to make them less burdensome on smaller-sized institutions.
The June report was part of an executive order by President Trump. The goal is to reduce regulations that crimped banks’ ability to lend to consumers and businesses.
However, Yellen warned on Thursday that some of the recommendations made to loosen bank regulations could put the country at risk, stopping short of naming specific proposals.
“If we were to adopt the Treasury report recommendations, it would more likely result in a potential financial crisis,” said Yellen.