In this report, we analyze today’s Joint Economic Committee hearing on the economic outlook with FRB Chair Janet Yellen, who today announced as we anticipated that she will not resign prior to her term end in January, 2018.  Members of both parties questioned her about the impact of Donald Trump’s election, with the chair making clear that the FRB has not seen any impact that would cause the FOMC to deviate from its assessment that economic data are consistent with expectations of an improving economy, but the FRB will continue to review incoming data and change its assessment if necessary.  Several GOP Members criticized accommodative policy.  Asked about the Dodd-Frank Act, Chair Yellen praised various aspects of the law such as higher capital requirements, more stringent liquidity requirements, central clearing for derivatives, margin requirements for cleared and uncleared derivatives, and OLA, saying these reforms diminish the odds of another crisis.  When questioned by Republicans on the GAO’s recent findings concerning FRB-run stress tests, Ms. Yellen defended the stress tests as central to FRB efforts to increase capital and insure that capital planning at large and systemic financial institutions is adequate.  She also noted that the GAO report found generally that CCAR and DFAST are useful.  She further pointed out that the FRB has already considered many of the recommendations in the GAO report, citing the pending proposal to reform coverage and content (see FSM Report STRESS26).

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