House lawmakers question Yellen on proposed capital standards

Lawmakers on the House Financial Services Committee today pressed Treasury Secretary Janet Yellen about proposed capital standards for certain banks, saying they worried about the broader economic effects of the rulemaking. Yellen appeared before the committee for the first of two congressional oversight hearings this week on the Financial Stability Oversight Council, where she was asked questions on a broad range of issues, from the FSOC listing some nonbanks as systemically important financial institutions to the current state of the commercial real estate market.

Lawmakers from both parties questioned Yellen on the proposed U.S. implementation of the Basel III endgame, with most opposed to the rulemaking in its current form. “I remain deeply concerned this will further diminish the credit capacities and weaken the economic conditions of our American people,” Rep. David Scott (D-Ga.) said. “I think the majority of our committee is very much against this,” he later added. “Are you with us on this? This will be terrible for our economy.”

Yellen said that banking regulators have been accepting comments on the proposal expressing similar concerns and will take those into account, although she didn’t share her thoughts on the rulemaking, for which Treasury is not responsible. “I think that is important to ensure that credit availably is not significantly diminished,” she said.

Also during the hearing, Yellen reiterated FSOC’s view that there should be a federal regulatory floor for stablecoins that would apply to states. “And that a federal regulator should have the ability to decide if a stablecoin issuer should be barred from issuing such an asset,” she said. “Also, we believe because wallets are a significant part of the stablecoin ecosystem… that it is critical to enact regulatory protections for holders of wallets.”