Courtesy of Pam Martens
Janet Yellen Appears Before the House Financial Services Committee, November 4, 2015
According to the Random House dictionary, Stockholm Syndrome is “an emotional attachment to a captor formed by a hostage as a result of continuous stress, dependence, and a need to cooperate for survival.” Regulatory capture – where big banks are actually the ones calling the shots to their regulators – appears to have morphed into Stockholm Syndrome based on a Congressional hearing yesterday.
House Financial Services Committee Chairman Jeb Hensarling dropped a bombshell on Federal Reserve Chair Janet Yellen in opening questions yesterday on the Fed’s role of supervising the largest, most systemically dangerous banks.
Hensarling queried if the Fed had crossed the line from being regulator to manager. We think the question should have been has the Fed devolved from regulator to emotionally-attached hostage. (There’s plenty of evidence for the latter as we’ll explain later in this piece.) The exchange went like this:
Hensarling: “We’ve had a number of individuals come to our Committee to tell us that Fed officials have regularly attended corporate board meetings of the systemically important financial institutions under the Fed’s purview. Is that true?”
Yellen: “So, I’m not sure if that’s true…It’s conceivable that that might have occurred. I’m not saying that it did not occur. I’d have to get back to you…”
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