Yellen Calls for Regulatory Meeting over U.S. Market Volatility

Daniel Fowler
February 4, 2021

U.S. Treasury Secretary Janet Yellen spoke on Tuesday with Mexican Finance Minister Arturo Herrera and underscored her desire to maintain close U.S. -Mexico coordination on economic and security issues, the Treasury Department said in a statement.

The gathering will include the heads of the Federal Reserve - formerly led by Yellen - as well as the Securities and Exchange Commission, Commodity Futures Trading Commission and Federal Reserve Bank of NY, which serves as the central bank's main monitor of Wall Street.

Republican and Democratic politicians have called for a review of trading regulations in recent days after a group of online small-time stock traders helped boost the share prices of previously falling stocks, including GameStop and movie theater brand AMC Entertainment. Posts encouraging silver buying also pushed prices up on Monday, although this proved to be short-lived.

The moves led to some retail investor apps such as Robinhood - which says its goal is to "democratize finance for all" - to limit trades on some of the most volatile stocks last week. "It's a rigged game, and it's been a set of players who come in and manipulate the market".

"We haven't seen anything to indicate anything that suggests it would bring down the market", Lee told NPR in an interview. House Financial Services Committee Chair Maxine Waters is planning a hearing February 18, while incoming Senate Banking Committee head Sherrod Brown said he'll hold a hearing but hasn't set a date.

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One of these is Citadel, which extended hedge fund Melvin Capital a $2.75 billion lifeline last week after the latter firm suffered massive losses in short positions.

Yellen has requested an ethics waiver to hold the meeting, a Treasury spokeswoman said, confirming a Reuters report. She received more than $700,000 in speaking fees from Citadel, the financial empire run by billionaire Ken Griffin.

Richard Berner, professor at New York University's Stern School of Business and the former director of the Treasury's Office of Financial Research, said it's important that the SEC and other regulators are monitoring markets for any signs of fraud or manipulation.

"Were they to escalate and persist, these events might erode investor trust".

The market turbulence comes at a particularly awkward time in Washington, where the Biden administration is still taking wing. Yellen would reportedly talk to the head of the SEC, CFTC, and the Federal Reserve, as per a report from Reuters.

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