Yellen's prepared remarks on the economy and Fed policy were
identical to those from her appearance on Tuesday before the Senate
Banking Committee, where she stood by her view that an accommodative
monetary policy is still needed even though the economy is
On Wednesday, Yellen told the House of Representatives Financial
Services Committee that she saw sufficient growth to support gains
in the labor market and that credit growth and leverage were at
She also addressed concerns raised about the Fed's oversight of
financial institutions and its use of re-purchase agreements.
Republican members of the panel peppered Yellen with sharper
questions than she faced during her Senate appearance, criticizing
the Fed for not operating with enough transparency.
Committee Chairman Jeb Hensarling of Texas asked if Yellen's weekly
discussions with the U.S. Treasury secretary should be disclosed to
"I'm not willing to report, on a weekly basis, private
conversations," Yellen responded, adding, however, that any
agreements that came from such discussions would be disclosed to the
Hensarling asked Yellen about a Republican-backed bill introduced
this month that would require the Fed to conduct more cost-benefit
analyses, provide transparency for Fed stress tests on banks and on
international regulations, and take a more rules-based approach to
"The overwhelming weight of evidence is that monetary policy is at
its best in maintaining stable prices and maximum employment when it
follows a clear, predictable monetary policy rule," Hensarling said.
Yellen said it would be a "grave mistake" for the Fed to commit to a
rules based approach to monetary policy, explaining that sticking to
such rules after the 2007-2009 financial crisis hit would have made
the economic situation even worse.
In a testy exchange, Representative Bill Huizenga, a Republican from
Michigan, laid out the rules of a new bill that he co-sponsored and
which is aimed at making the Fed more transparent, reminding Yellen
that a requirement for the Fed to follow a rules-based approach
grants the flexibility to change course when needed.
[to top of second column]
Scott Garrett, a New Jersey Republican, also took issue with the
Fed's ability to intervene in troubled financial institutions,
expressing worry of more firms becoming eligible for taxpayer
protection in a crisis.
Yellen, who answered each question slowly and deliberately in a tone
that hardly changed, replied that such action from the Fed would
only come in extreme circumstances.
Regarding the Fed's current use of reverse repurchase agreements for
excess bank reserves, one lawmaker expressed concern that it was a
dramatic expansion of the Fed's authority.
"We have discussed and are aware of the potential, if it's available
on a very large scale and can be expanded and contracted very
quickly, to create financial stability risks, and we absolutely
intend to make sure that we address those risks," Yellen said in
response to the lawmaker.
Yellen's appearance in front of the House panel is part of the Fed's
required, semi-annual delivery of its economic and monetary policy
outlook to Congress.
(Additional reporting by Jonathan Spicer in New York and Moriah
Costa in Washington; Editing by Paul Simao)
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.