Lucas Questions Treasury Secretary Yellen On Importance of Liquidity, New Sanctions Against Russia

Apr 06, 2022
Economy
Press

Washington, DC – Congressman Frank Lucas (OK-03) today questioned U.S. Treasury Department Secretary Janet Yellen at a House Financial Services Committee hearing on the state of the international financial system.

Lucas voiced his concern that the vast and rushed agenda at the U.S. Securities and Exchange Commission could threaten market liquidity as the U.S. navigates through economic uncertainty. Lucas also question Secretary Yellen on the United States’ and European Union’s urgency in sanctioning Russian energy.

Watch Lucas’ Q&A here.

Excerpts:

On the importance of liquidity and the SEC’s policies

Lucas:  Secretary Yellen, I’d like to discuss with you today a significant concern for me.

The U.S. economy is facing significant challenges. We are coming off the heels of a global pandemic that we are still studying the effects of. The U.S. economy is also experiencing supply chain backlogs and inflation at a 40-year high, and the Russian invasion of Ukraine exacerbates economic uncertainty. 

In Oklahoma, small businesses, farmers, and ranchers are navigating surging gas prices and volatile agricultural markets for inputs like grain and fertilizer. 

In these uncertain times, investors seek to protect their retirement savings, to hedge risk, and, of course, to safeguard their businesses.

As I’m sure you can appreciate, supporting liquid markets to protect the U.S. economy in the face of substantial headwinds should be a priority. Unfortunately, I’m concerned about the volume and significance of rule proposals coming out of the SEC in such a short amount of time runs counter to this goal.

Since November, the SEC has proposed over 20 new major and far-reaching rule changes. These rules impact every asset class under the SEC’s jurisdiction. The sheer amount and complexity of these rulemakings compounded with the short and simultaneous comment periods- and I note that short and in many cases simultaneous comment periods- could negatively impact markets and the public that depends on them. 

It is important for Congress to be able to fully understand the impact and potential unintended consequences of the SEC’s sweeping new proposals.

So, Secretary Yellen, could you speak to the importance of market liquidity during periods of massive economic uncertainty?  

Yellen:  Well, certainly, having liquid markets is extremely important to businesses and consumers to be able to engage in financial and hedging transactions that they count on to deal with risk. So, I certainly agree with the idea that that should be and is an important priority.

Lucas: And I realize you’re not on the SEC. But the current approach, I worry, could rattle markets by rolling out extensive proposals during a time when strong capital markets are just essential to our constituents’ economic growth and national security.

On sanctions on Russia

Second question, Secretary. News reports suggest the administration is preparing to impose a new round of sanctions on Russia following recent atrocities, including two of Russia’s largest financial institutions. The European Union is also said to be preparing these sanctions. In your discussions with your international counterparts, could you speak to the urgency in which the EU plans to intensify Russian sanctions, particularly focusing on a ban on Russian coal, oil, and natural gas exports?

Yellen:  I think our partners are outraged by the atrocities that are being committed in Russia, as we are, and we are working very actively with them to impose new sanctions that will cause Russia significant pain. This morning, we announced our own sanctions package that will now fully block Russia’s largest Bank, Sberbank, from participating in the U.S. financial system, as well as their largest private Bank, Alfa-Bank. The President will sign new a Executive Order prohibiting new investment in Russia by all us persons and additional sanctions have been placed on elites and some state owned enterprises. And Europe is also working at a rapid pace to announce additional sanctions. I’m not going to try to tell you exactly what they are, but they’re certainly intent to add to the sanctions they have in place.

Lucas:  Absolutely, Secretary. But you don’t see a reluctance on their part to target Russian energy exports, do you? Or change in that reluctance?

Yellen:  They recognize clearly the importance of depriving Russia of export revenue to the maximum extent that they possibly can, but regrettably have dependence on oil and natural gas. So, there are tradeoffs there that they’re trying to manage as best they can.

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