Treasury Secretary Yellen Opens Review of Markets' Pandemic Panic

Treasury Secretary Yellen met with a council of regulators Wednesday to discuss the economy's stability following the 2020 market meltdown.

"We are digging out of a deep hole now, but we should be mindful that the hole could easily have been even deeper," Yellen said in opening remarks at the Financial Stability Oversight Council, The Wall Street Journal reported. "The fact that extreme policy interventions were still required to support market functioning should serve as a clear reminder: We have to do more to address vulnerabilities in the financial system."

The council discussed climate change in the open part of the meeting, and then addressed the state of open-end mutual funds behind closed doors, according to a statement by the U.S. Department of the Treasury.

The fear of the pandemic triggered a need for liquidation and cash for investors resulting in a high rate of volatility for the United States markets. The triggering volatility caused panicking investors to leave their mutual funds faster than they had in the 2008 crisis. The volatility in markets relaxed after the Federal Reserve cut interest rates to zero, however.

"The pandemic showed that leverage of some hedge funds can amplify stresses," Yellen said, referring to the fact, while investors saw profits rise, many working-class people could not afford to invest and struggled to make ends meet.

Sen. Pat Toomey, R-Pa., voiced concern the FSOC might be overstepping their responsibilities with their emphasized focus on climate.

"I remain concerned that FSOC members may seek to advance a progressive social agenda on global warming, which is beyond the scope of their respective missions and authorities," Toomey, ranking member of the Senate Banking Committee, told the Journal.

"This effort is not grounded in science or economics, but is instead a self-fulfilling prophecy: claim there are future regulatory risks for carbon intensive industries, then use unelected, unaccountable financial regulators to impose regulatory costs on those activities."

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