In what was likely a far more genial session than Chair Yellen will encounter tomorrow at House Financial Services, the Senate Banking Committee today gave her a courteous hearing as Chairman Crapo (R-ID) laid out his goal of crafting limited reforms on a bipartisan basis. Eschewing the sweeping agenda of the Hensarling Choice Act (see Client Report REFORM119), Sen. Crapo did not mention the CFPB, Volcker, leverage capital, or many other hot-button issues. Instead, his priorities are the $50 billion systemic threshold, GSE reform, community-bank relief, sanctions, and flood insurance. In part because of his interest in housing finance, Sen. Crapo pressed the Fed chair hard on the central bank’s portfolio and its large positions in agency RMBS. This led Ms. Yellen to indicate for the first time that she has rejected pressure from former Chairman Bernanke and others and will instead seek to return the FRB to monetary policy that – as the Trump Administration would doubtless also prefer – relies on short-term interest rates.
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