November 14, 2013


WASHINGTON – U.S. Senator Mike Crapo (R-Idaho), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during a Banking Committee hearing on the nomination of Janet L. Yellen to be Chairman of the Board of Governors of the Federal Reserve System:
"Thank you, Mr. Chairman, for holding today’s hearing on the nomination of Dr. Yellen to be the next Chair of the Federal Reserve Board.  Today’s hearing is an opportunity not only to examine Governor Yellen’s qualifications, but also her views on the role and direction of the Federal Reserve.
"In recent years, the Fed has engaged in unprecedented policies, including purchasing trillions of dollars in Treasuries and mortgage-backed securities. Current Fed purchases total up to $85 billion a month.
"As a result, the next Fed Chair will inherit a balance sheet that currently stands at approximately $3.8 trillion—four times higher than before the financial crisis.
"I have been a long-time critic of the Fed’s quantitative easing purchases.  Now that a reduction in asset purchases finally seems to be on the horizon, I am concerned that markets have become overly reliant on them.  That is why it is essential to know how Dr. Yellen, if confirmed, would manage the process of normalizing monetary policy.
"The Fed has indicated that it will hold short-term interest rates low for an extended period.  In a speech in April, Governor Yellen stated “the policy rate should, under present conditions, be held lower for longer.”  But how long is too long?
"The extended period of low rates is hurting individuals living on fixed income investments and defined-benefit pension funds.  The International Monetary Fund cautioned that the actions taken by central banks “are associated with financial risks that are likely to increase the longer the policies are maintained.”  How would the Fed ensure that these risks are avoided under Dr. Yellen’s chairmanship?
"In addition to unprecedented monetary policy, the next Fed Chair will finalize several key financial regulatory reform rules.  These rules must balance the financial stability with the inherent need for markets to take on and accurately price risk.  They must be done without putting the U.S. markets at an undue competitive disadvantage, or harming consumers with unintended consequences.
"The Chair of the Federal Reserve must understand how different rules interact with each other, what impact they have on the affected entities and the economy at large.  Just as some worried that we did not have enough regulations on the books to prevent the economic crisis, some of us worry that the post-crisis response will result in a regulatory regime that stifles growth and job creation.
"The Chair of the Federal Reserve must understand the need for that balance and how to carefully manage competing demands without harming the economy.  The U.S. banking system and capital markets must remain the preferred destination for investors throughout the world.
"During previous hearings, I have asked Chairman Bernanke what parts of Dodd-Frank could be revisited on a bipartisan basis.  The Chairman identified the end-user and swaps push-out provisions, as well as the need for regulatory relief on small banks.  Chairman Bernanke also commented in July that legislation is needed to allow the Fed flexibility to deal with the Collins amendment and tailor appropriate capital requirements for insurance companies.
"I look forward to hearing Dr. Yellen’s views on what Dodd-Frank fixes Congress ought to consider, and how she intends to achieve an appropriate balance between prudential regulation and economic growth, if confirmed. 
"In addition to the previously mentioned issues, the makeup of the Board itself will change in the near future.  Governor Sarah Bloom Raskin has been nominated to a position at Treasury, and Governor Elizabeth Duke resigned in August.  If Governor Yellen is confirmed as Chair, the Fed will need a new Vice Chair as well. 
"Moreover, Dodd-Frank created a Vice Chair of Supervision which has not been officially filled.  These appointments will shape the direction of Federal Reserve policymaking for years to come.
"I look forward to working with the Chairman to see that these positions are filled in a way that provides the proper balance and expertise at the Fed.
"Thank you, Mr. Chairman."