As anticipated, FRB Chair Yellen got a decidedly hostile reception from House FinServ Republicans today, continuing the impasse over a pending subpoena and demands that the FOMC adopt a rule-based approach to monetary policy. Republicans also took Ms. Yellen to task over Treasury-market illiquidity, strongly questioning the equivocal conclusions from Monday’s inter-agency report (see Client Report SYSTEMIC81). Ms. Yellen also took fire on TBTF, promising a final rule on 13(3) authority this fall (see FSM Report RESCUE67). If the FRB finalizes something akin to the proposal, we expect both Republicans and Democrats to press legislation like that recently proposed by Sens. Warren (D-MA) and Vitter (R-LA), which is analyzed in FSM Report FEDERALRESERVE21).


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