JACKSON HOLE, Wyo.—Federal Reserve Chairwoman Janet Yellen defended the financial regulations enacted in the wake of the financial crisis that began a decade ago, while keeping the door open to modest changes in the postcrisis rules.
Her speech Friday at the U.S. central bank’s annual retreat in Grand Teton National Park came as the Trump administration and congressional Republicans look to roll back regulations that they say have made it harder for families and businesses to borrow money, hurting the economy. She largely rejected those arguments.
“The balance of research suggests that the core reforms we have put in place have substantially boosted resilience without unduly limiting credit availability or economic growth,” Ms. Yellen said.
But, she added, the Fed is “committed to evaluating where reforms are working and where improvements are needed to most efficiently maintain a resilient financial system.”
Ms. Yellen didn’t discuss the outlook for economic conditions or monetary policy. Even so, the S&P 500 rose, the yield on benchmark 10-year Treasury notes fell, and the U.S. dollar weakened versus a basket of major currencies. Dennis DeBusschere, macro research analyst at Evercore ISI, said the market’s reaction reflected the view that financial stability concerns won’t prompt the Fed to raise rates.
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This week could be Ms. Yellen’s final appearance at the Jackson Lake Lodge as the Fed’s leader, since her term is up in early February. President Donald Trump has said she is among the candidates he is considering for the post; another is Mr. Trump’s National Economic Council director, Gary Cohn. The job requires confirmation by the Senate, where Republicans hold a slim majority.
Ms. Yellen’s “passionate defense of the postcrisis tightening of financial regulation isn’t going to go down particularly well at the White House,” and could boost Mr. Cohn’s chances of being named Fed chairman, said Paul Ashworth, chief U.S. economist at Capital Economics.
Mr. Cohn also made news Friday, telling the Financial Times that the Trump administration must do more to condemn hate groups.
Mr. Trump has made rolling back federal regulations a priority, and Republicans have long been critical of the 2010 Dodd-Frank financial overhaul law enacted in the wake of the 2007-09 crisis and recession.
“I have so many people, friends of mine, that had nice businesses. They can’t borrow money,” Mr. Trump said in February. “They just can’t get any money because the banks just won’t let them borrow it because of the rules and regulations in Dodd-Frank.”
Mr. Trump has nominated Randal Quarles, an investment-fund manager and ex-Treasury official, as the Fed’s vice chairman of supervision, a powerful post that was created in 2010 but never formally filled by President Barack Obama. Daniel Tarullo, a Fed governor who de facto held the job, resigned earlier this year.
Mr. Quarles, who told lawmakers last month that postcrisis financial rules require “some refinements,” is awaiting confirmation by the Senate.
Ms. Yellen, in her Friday speech, said the postcrisis financial overhauls were a necessary response to the events of last decade. The new rules have left the U.S. financial system “substantially safer” and better positioned to absorb future shocks without causing a broad economic downturn, she said.
“Because of the reforms that strengthened our financial system, and with support from monetary and other policies, credit is available on good terms, and lending has advanced broadly in line with economic activity in recent years, contributing to today’s strong economy,” she said.
She acknowledged postcrisis rules may be affecting market liquidity somewhat, but said “no single factor” is at work. She also said “credit may be less available to some borrowers, especially home buyers with less-than-perfect credit histories and, perhaps, small businesses,” but that “many factors” probably are affecting mortgage lending.
Still, Ms. Yellen said the Fed is committed “to evaluating the effects of financial-market regulations and considering appropriate adjustments.”
She also said that “a broader set of changes to the new financial regulatory framework may deserve consideration. Such changes include adjustments that may simplify regulations applying to small and medium-sized banks and enhance resolution planning.”
Ms. Yellen isn’t the only U.S. central banker weighing the costs and benefits of postcrisis rules. Fed governor Jerome Powell told lawmakers in June that it could be appropriate toease annual stress tests for big banks. Fed Vice Chairman Stanley Fischer, however, has argued that it would be dangerous for the U.S. government to jettison its new regulations.
The theme of this year’s Jackson Hole conference, which is hosted by the Federal Reserve Bank of Kansas City, is “Fostering a Dynamic Global Economy.”
—Christopher Dieterich contributed to this article.