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The Senate Really Wants Janet Yellen to Talk about Donald Trump

Janet Yellen really doesn’t want to talk about Donald Trump. But that won’t stop a number of senators from trying.

In a hearing before the Senate Banking Committee Tuesday, they pressed Yellen on the economic impact of everything from tax reform and the possible repeal of the Affordable Care Act, to immigration and even climate change.

“We recognize that there may be significant economic policy changes and that those changes could affect the outlook,” Yellen said. “We’re very well aware of that. We don’t yet have enough clarity on what changes will be put in place to really clearly factor those policy changes into the economic outlook.”

Sen. Elizabeth Warren, a democrat from Massachusetts, used her line of questioning to fact-check President Trump’s claim that business lending had dried up as a result of Dodd-Frank banking regulations.

Last week, President Trump said it was time to “do a number” on Dodd Frank because it was making it hard for people to borrow. Trump said he had a lot of friends who couldn’t get loans, but it seems many of Trump’s associates haven’t had trouble borrowing lately.

Yellen noted business lending by banks has exceeded the 2008 peak. According to this chart from the St. Louis Fed, it’s at its highest levels since the late 1980s, even after adjusting for inflation.

Yellen had also noted that only a small number of business owners had complained about tight borrowing conditions recently. The latest surveys by the National Federation of Independent Business, show only four percent of small business owners report that their borrowing needs were not satisfied.

That didn’t stop some senators from continuing to claim that it was obviously killing lending, small banks, and by extension small businesses. Republican Senator Thom Tillis questioned Yellen’s numbers of the availability of loans, calling them “absolutely defiant of what I’m seeing in the small business community and community banks particularly in North Carolina,” his home state. Tillis said the numbers he has seen show that business lending has slowed since Dodd-Frank has passed.

That, however, doesn’t appear to be the case. According to the latest data from the Federal Deposit Insurance Corp., business lending, which is categorized as commercial and industrial lending, has risen on average 8% a year since the passage of Dodd-Frank. That’s about double the average growth rate of C&I loans since the FDIC first began collecting the data back in the mid-1980s. It’s also faster than the 5% loan growth that C&I averaged in decade before Dodd-Frank was passed.

Sen. Warren also prompted Yellen to comment on an assertion by top Trump economic advisor Gary Cohn, and former Goldman Sachs top banker, that banks, as a result of Dodd-Frank, have been forced to hold larger reserves that cannot be leant to borrowers.

“It’s not a requirement that they take money and stick it in a safe where it cannot be used,” Yellen said.

Cohn, in an interview with Fox Business earlier this month had claimed that banks, “instead of lending capital … to their clients and allowing them to grow their businesses and hire people and create jobs, they’ve been taking those reserves and taking that capital and hording it to meet the regulatory requirements and pay for additional regulations.”

Sen. Dean Heller, a republican from Nevada, pressed Yellen on several specific policy proposals, and she refused to bite.

Asked specifically how she felt about the proposed border tax, she said, “I’m not going to tell you that, either.”

As is customary for the Fed chair, Yellen is scheduled to testify again on Wednesday before the House Financial Services Committee. Her prepared remarks are expected to be identical to those she delivered today.