Defending Dodd-Frank: Federal Reserve Board Chair Janet Yellen defended several parts of Dodd-Frank in her testimony before the House Financial Services Committee on Wednesday. Regarding the Volcker Rule's ban on banks' proprietary trading, Yellen dismissed concerns presented by Rep. Jeb Hensarling, R-Texas, the committee chairman, who cited a recent Fed study that the rule had had a "deleterious" impact on liquidity in the corporate bond market. Yellen said the study did not represent the views of the whole board, adding, "It is difficult to come to a conclusion because by most metrics, liquidity in corporate bond markets still remains very healthy."
Regarding the Consumer Financial Protection Bureau, Yellen declined to assess the agency's overall effectiveness, but said: "We know consumer abuses in mortgage lending were an important contributor to the financial crisis and could be a source of financial instability in the future, if we're not attentive to the potential abuses." The CFPB is currently funded by the Fed, but a bill sponsored Wednesday by a group of Republican senators would bring the CFPB's funding under the congressional budget process. Wall Street Journal, Financial Times, New York Times