Speaking before the House Committee on Financial Services last week, Janet Yellen, head of the Federal Reserve, testified that the US financial system is much safer today than it was in 2007 when the most recent economic decline commenced.
“I believe the financial system is much safer. There is twice as much high-quality capital among the largest firms now than there was before the crisis,” Yellen said at the twice-annual House discussion on monetary policy and the economy.
Yellen said that the Fed now conducts “stress tests” to evaluate whether large financial institutions will be able to survive through hard economic times. The Federal Reserve Bank of St. Louis said that the number of US banks has shrunk in recent years, but the banks that remain are larger. They asserted that in 2011 the five largest US banks controlled 48 percent of total assets. The largest bank among them is JPMorgan Chase Bank with $1.8 trillion of assets.
Federal Reserve Governor Daniel Tarullo said in February 2014 that more work was needed to end the belief that the largest of the banks are “too big to fail,” and to also work to lower risks to the US financial system.
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