At her Senate confirmation hearing next month, Federal Reserve chair nominee Janet Yellen can expect some questions about the contrast between public remarks she made after becoming president of the Federal Reserve Bank of San Francisco in 2004 that downplayed risks to the economy, with behind the scenes “pleading with Washington” to let bank regulators crack down on risky real estate lending during the boom, Reuters reports.
Yellen is seen as having taken note of signs of a real estate bubble before many other Fed officials, but “gave little hint of it as she traveled around her district speaking to banking and business groups,” Reuters said.
By 2005, Yellen and her staff had begun to realize “there might well be a bubble,” but said in a speech that year that “arguments against trying to deflate a bubble outweigh those in favor of it.”
At her 2010 confirmation hearing to be the Fed’s vice chair, Sen. Richard Shelby claimed Yellen’s region suffered a “breakdown of regulatory oversight,” which he characterized as “lax and inappropriate.”
In hindsight, Yellen concluded, “What we have learned … is it was very hard for all of the regulators involved to take away the punch bowl in a timely way.” Source: reuters.com.
