A few questions, so Congress doesn’t waste Janet Yellen’s time E-mail Tweet Facebook Google Plus Linkedin Share icons by Eleanor Bloxham @FortuneMagazine July 14, 2014, 4:19 PM EDT University of Virginia and Harvard researchers have found that people can’t stand thinking on their own for even 15 minutes. So much so that two-thirds of men and one quarter of women participating in the study self-administered an electric shock that they’d previously said they’d pay to avoid just to escape 15 minutes of uninterrupted thinking. I’m guessing this is what is going on in D.C. right now, as some members of Congress try to push the Fed to mindlessly raise interest rates—likely an unpleasant shock to financial stability—when better thinking is what’s needed. On Tuesday and Wednesday, in hearings with the Senate Banking Committee and the House Financial Services Committee, Federal Reserve Chair Janet Yellen will get to see if members of Congress have an attention span—and, if so, how long it is. In a July 2 speech to the International Monetary Fund (IMF), Yellen laid out a thoughtful approach to achieving financial stability. Rather than simply concentrating on the use of interest rate shocks, the Fed should use the full range of its regulatory and supervisory powers, she argued. Yellen’s approach, of course, differs markedly from her predecessor Alan Greenspan, one of the chief architects of the Great Recession, who made Time Magazine’s list of 25 people to blame for the financial crisis. Not only did Greenspan raise interest rates from historic lows when the economy was fragile, Time notes that he also had a “disdain for regulation” and it was only post-crisis thatGreenspan admitted his lack of wisdom in believing “that financial firms could regulate themselves.” During his reign, Congress swooned, mesmerized by Greenspan’s convoluted ramblings. (A new term was coined as a result: Fed Speak.) If members of Congress stop to think about it, Yellen’s IMF speech was laying out important areas for continued Congressional oversight. Rather than take up all the time at hearings quizzing her about interest rates, Congress ought to check in on the Federal Reserve’s efforts to address the issues she says led to the financial crisis in the first place. For example, Congress should be using Yellen’s statements to ask her about what is left to be done to address “gaps in the regulatory structure that allowed some systemically important financial institutions (SIFIs) and markets to escape comprehensive supervision.” They could also ask what more needs to happen to increase “the transparency of exotic financial instruments” and address “deficiencies in risk measurement and risk management within the private sector.” On July 10, Bloomberg News reported on the Bank of England’s concerns about the ability of U.K. banks to measure risk and capital requirements. Our regulators likely have similar concerns about U.S. banks’ capabilities and it would be helpful for Congress to determine Yellen’s views. As she noted in her speech to the IMF, bank capital is one of the “tools that build resilience” into the financial system. Yellen’s speech mentioned other tools that can help prevent future financial crises, including liquidity buffers, effective governmental resolution of SIFIs, and derivatives regulation. Congress should get her to address each of these as well as areas where she thinks the U.S. has made progress. How would she recommend bank stress tests and capital analyses be further improved? How might regulators enhance supervision and examination of the SIFIs? What recommendations does she have to strengthen the living wills for the largest banks in the U.S.? Yellen has also suggested that more needs to be done to reduce risks in the short-term wholesale funding markets for all market participants. Congress should understand in more detail what she would propose. In her speech to the IMF, she noted that regulators in Canada, the U.K., and Switzerland as well as Norway and Sweden have determined that tinkering with interest rates is just one limited approach to addressing financial stability. Congress should inquire about those countries’ experiences. Asking if interest rates should be adjusted is a knee-jerk question. Congress should be raising other, more important issues right now. Will they push Yellen to look for the keys to financial stability under the lamppost—or, will they give it some thought and ask her a few better questions? Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance. She may be reached at email@example.com.