In testimony before the House Financial Services Committee, Treasury Secretary Janet Yellen highlighted the Biden administration’s economic performance and ongoing financial stability efforts, focusing on banking, climate change, cybersecurity, AI and digital assets.
In testimony before the Financial Services Committee on February 6, 2024, U.S. Treasury Secretary Janet L. Yellen provided a comprehensive update on the state of the U.S. economy and the steps being taken to maintain financial stability. Secretary Yellen said she pointed to the historic recovery led by the Biden administration over the past three years, emphasizing strong GDP growth, significant reductions in inflation, and a healthy labor market. She pointed out that labor force participation among older workers is increasing and the unemployment rate has been below 4% for the longest streak in 50 years. Yellen also highlighted the significant increase in median household wealth, which contributed to the largest three-year increase on record.
The core of Yellen’s testimony was devoted to the resilience of the U.S. financial system and emphasized the role of the Financial Stability Oversight Council (FSOC) in monitoring a wide range of risks. These include challenges in the real estate sector, geopolitical conflicts, technological developments, and specific responses to the failure of two regional banks to prevent widespread banking system contagion in March 2023.
Yellen outlined five key areas of focus for FSOC, detailed in its 2023 annual report.
Banking sector and non-banking financial institutions: Reviewing capital measures, improving resolution of large banks, and efforts to address vulnerabilities in uninsured deposits. The risks posed by non-bank financial institutions, including liquidity mismatches and leverage, are also under scrutiny, and the Securities and Exchange Commission is taking steps to address these issues in hedge funds and other investment funds.
Climate-related financial stability risks: Strengthen assessment efforts and coordination of climate-related risks and promote disclosure so that investors and financial institutions can consider these risks in their decision-making.
Cybersecurity Risk: Strengthen protection through information sharing and partnerships between state and federal agencies and the private sector.
Artificial Intelligence in Financial Services: Monitor the benefits and risks associated with AI, including cyber and model risks, while encouraging ongoing expertise and monitoring capability development.
Digital Assets: We urge Congress to pass legislation to address the risks posed by cryptocurrency asset platforms and price volatility, advocate for enforcement of applicable laws and regulations, and regulate stablecoins and cryptocurrencies that are not classified as securities. .
Secretary Yellen’s testimony reflects the administration’s commitment to maintaining economic growth while navigating the complexities of modern financial risks. This highlights the importance of regulatory vigilance and legislative action in areas such as digital assets and climate change, which are essential to the long-term health of the U.S. economy and financial system.
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