Treasury Secretary Janet Yellen Plans to Increase Oversight on Financial Sector

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On Wednesday, Treasury Secretary Janet Yellen laid out a plan to address risks to the US financial system.

Yellen leads the Financial Stability Oversight Council and stated that events in the financial market within the past year have increased concerns. These concerns were exacerbated earlier this week when a hedge fund defaulted causing many banks to reevaluate their liquidity.

“If not for the swift action of the Federal Reserve, Treasury, Congress and others, those stresses may have led to an even greater economic contraction,” she said. “Indeed, we are digging out of a deep hole now, but we should be mindful that the hole could easily have been deeper.”

Yellen addressed three areas where she hopes to see improvement: vulnerabilities in money market and open-end mutual funds, weaknesses in the US Treasury market, and climate change risks.

Yellen also confirmed plans to reestablish the FSOC hedge fund oversight group. “The pandemic showed that leverage of some hedge funds can amplify stresses, too,” Yellen said. “This council used to have a hedge fund working group, and as of today we have one again. We’re establishing the working group so that we can better share data, identify risks and work to strengthen our financial system.”

It has been a crazy year for the financial system but hopefully, new regulations and additional oversight will restore stability.

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