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Incredible! Janet Yellen Acknowledges Bubble Danger, Increased Risk-Taking Thanks to Easy Fed Policy

I could be wrong here, but it’s my recollection that Janet Yellen was not one of JDA’s favorite Federal Reserve Bank Presidents, see this

and this and the next one:

So, that’s the background for JDA’s sudden change of heart, or least warming up. – Ilene 

Incredible! Janet Yellen Acknowledges Bubble Danger, Increased Risk-Taking Thanks to Easy Fed Policy

Courtesy of Jr. Deputy Accountant

Unbelievable UNBELIEVABLE and I wouldn’t believe it if I hadn’t read it four times. Is this the Janet Yellen I know and don’t love? Could it be that removing her from San Francisco resolved her mental imbalance and granted her sanity and the ability to think ahead in a cool, calm manner?

It makes the bile rise in my throat just to think about but I have to admit I am impressed. Go Janet go!

Bloomberg:

Janet Yellen, in her first public remarks as the Federal Reserve’s vice chairman, said low interest rates may give firms the incentive to engage in excessive risk-taking.

“It is conceivable that accommodative monetary policy could provide tinder for a buildup of leverage and excessive risk-taking in the financial system,” the 64-year-old central banker said in a speech today in Denver.

Yellen warned that Fed policies may in some cases be encouraging firms to “reach for yield” and could present officials “with difficult tradeoffs” if “emerging threats to financial stability become evident.”

The Fed vice chairman spoke while central bank officials debate whether to take further action to stimulate the economy, and as the Fed board in Washington gears up to implement directives under the Dodd-Frank law that overhauls U.S. financial regulation. Her comments weren’t specifically focused on the Fed’s current monetary policy.

“Our goal should be to deploy an enhanced arsenal of regulatory tools to address systemic risk,” Yellen, the former president of the San Francisco Fed, said in a luncheon address to the National Association for Business Economics. “We need macroprudential policy makers ready to take away the punch bowl when the party is getting out of hand.”

OK well we already know they don’t have ANY arsenal, let alone an enhanced one but beyond that I’m thrilled to hear Janet is considering not only the instant effects of her Fed’s easy monetary policy but also the potential consequences. Such a proud day.


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