Yellen to Trump: don’t expect a flip-flop on financial reforms

Jackson Hole, Wyo. (Reuters): Janet Yellen delivered a message to President Donald Trump on Friday, making it clear that if he re-nominates her as Federal Reserve chair she will not turn her back on the raft of U.S. financial reforms that Republicans want to roll back.

Governor of the Bank of Japan Haruhiko Kuroda (L to R), United States Federal Reserve Chair Janet Yellen and President of the European Central Bank Mario Draghi walk after posing for a photo opportunity during the annual central bank research conference in Jackson Hole, Wyoming, August 25, 2017 - REUTERS 

Her speech to the world’s top central bankers in Jackson

Hole, Wyoming, comes at a time when the chaos at the White House may make it more likely that she would be appointed to serve another four years to head the U.S. central bank.

Yellen, whose term ends in February, warned that “for some” memories of the 2007-2009 financial crisis may be fading, and she said that only “modest” adjustments could be made to regulations meant to protect the economy from runs on banks and other financial panics.

President Trump and congressional Republicans say many of the Obama-era rules go too far in choking off credit and burdening firms with unnecessary compliance.

“Yellen’s passionate defense of the post-crisis tightening of financial regulation isn’t going to go down particularly well at the White House,” said Paul Ashworth, chief U.S. economist at Capital Economics, in Toronto.

Yet with Trump’s regulatory, tax and infrastructure policy plans so far delayed, and the White House struggling to fill several key posts, Yellen, a Democrat, may represent the President’s best shot at ensuring stability at an institution critical to running the economy smoothly. While Trump may disagree with Yellen’s big-government stance on regulatory policy, he is more aligned with her track record of keeping rates low to get Americans back to work.

In addition, she said she was open to some of the key changes that the administration, and its nominee as Fed vice chair for regulation, Randal Quarles, want to pursue.

Along with her standing among economists and market participants, Yellen has a public lobby as well. Demonstrators here held a rally outside the conference donning wigs fashioned after Yellen’s hairstyle. The organizers, the Fed Up Coalition that has criticized the central bank’s recent interest-rate hikes, want Trump to stick with Yellen.

The Fed chair has not said explicitly whether she would be open to another term, a question that has taken on added interest following intense criticism of Trump’s response to a white supremacist rally in Charlottesville, Virginia. Yellen, 71, is Jewish, and her image was included in a Trump campaign ad shortly before the election criticized as anti-Semitic.

But Yellen may come under increased pressure from liberals to accept if nominated, as the Fed is an independent agency and is not viewed as being part of the presidential administration.