Treasury Secretary Janet Yellen Highlights Biden Administration’s Economic Achievements and Financial Stability Efforts
In a testimony before the House Committee on Financial Services on February 6, 2024, U.S. Treasury Secretary Janet L. Yellen provided an update on the state of the U.S. economy and the ongoing efforts to maintain financial stability. Secretary Yellen emphasized the historic recovery driven by the Biden Administration, highlighting strong GDP growth, significant inflation reduction, and a healthy labor market.
Secretary Yellen pointed out that the prime-age labor force participation rate has increased, and the unemployment rate has remained below 4 percent for the longest streak in 50 years. She also highlighted a substantial increase in household median wealth, which is attributed to the largest three-year gain on record.
One of the key topics in Secretary Yellen’s testimony was the resilience of the U.S. financial system. She emphasized the role of the Financial Stability Oversight Council (FSOC) in monitoring various risks to ensure financial stability. These risks include challenges from the real estate sectors, geopolitical conflicts, technological developments, and the specific response to the failure of two regional banks in March 2023.
The FSOC’s 2023 annual report outlined five key areas of focus, which Yellen highlighted in her testimony:
1. Banking Sector and Nonbank Financial Institutions
The FSOC is reviewing capital measures, improving resolvability at large banks, and addressing vulnerabilities from uninsured deposits. Nonbank financial institutions are also under scrutiny, with efforts to address liquidity mismatch and leverage risks in hedge funds and other investment funds.
2. Climate-Related Financial Stability Risks
The FSOC is enhancing assessment efforts and coordination around climate-related risks. This includes promoting disclosures to enable investors and financial institutions to factor these risks into their decisions.
3. Cybersecurity Risks
The FSOC is bolstering protections through information sharing and partnerships between state and federal agencies, as well as the private sector, to mitigate cybersecurity risks.
4. Artificial Intelligence in Financial Services
The FSOC is monitoring the benefits and risks associated with artificial intelligence (AI) in financial services. This includes addressing cyber and model risks while encouraging continued expertise and capacity development in monitoring AI.
5. Digital Assets
The FSOC is addressing risks from crypto-asset platforms and price volatility. Secretary Yellen advocates for the enforcement of applicable laws and regulations, and urges Congress to pass legislation regulating stablecoins and crypto-assets not classified as securities.
Secretary Yellen’s testimony highlights the Biden Administration’s commitment to sustaining economic growth while addressing modern financial risks. It emphasizes the importance of regulatory vigilance and legislative action in areas such as digital assets and climate change, which are vital for the long-term health of the U.S. economy and financial system.
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