The Fed: Powell says the U.S. no longer has too-big-to-fail banks

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Bloomberg, Getty Images, Regions

Are any large U.S. banks too big to fail? The incoming chairman of the Federal Reserve says “no.”

The likely next chairman of the Federal Reserve said he thinks the U.S. is no longer in any danger of banks “too big to fail.”

In a Senate confirmation hearing, Jerome Powell said regulators have “made a great deal of progress” through stress testing and other means to ensure the failure of a big bank would not harm the broader U.S. economy.

“I would answer no,” Powell said when asked if any banks were still too big to fail. Powell was recently nominated by President Trump to replace Janet Yellen as the leader of the U.S. central bank.

Also Read: Live blog of Jerome Powell confirmation hearing

The failure of several major Wall Street banks, including Lehman Brothers, contributed to the 2008 financial crisis that deepened a U.S. recession and caused the worst downturn since World War Two. In the aftermath Washington passed legislation to tighten rules on the nation’s biggest banks and make sure a failure would not drag down the entire U.S. economy.

In an exchange with Democratic Sen. Elizabeth Warren, a harsh critic of Wall Street, Powell said he believes current rules are sufficient to prevent a replay of the financial crisis. He said he saw no need for stricter rules and hoped as chairman to look for ways to ease what he viewed as excessive regulations.

“There’s certainly a lot of regulatory burden,” said Powell, acknowledging he supports a “rewrite of the Volcker rule.” The contentious rule, named after former Fed Chairman Paul Volcker, restricts banks from trading on their own behalf.

The response by Powell elicited concerns among Warren and other Democrats.

“I am deeply concerned that you believe the rules are too hard on Wall Street banks,” she said, pressing Powell to point to any regulations he thinks need to be strengthened.

Powell said he thought the regulatory framework established after the 2007-2009 recession was “tough enough.”