In a direct address to the House Financial Services Committee on Tuesday, Treasury Secretary Janet Yellen raised significant concerns regarding the commercial real estate sector and outlined the Financial Stability Oversight Council’s focused attention on the risks associated with digital assets, including stablecoins and crypto asset volatility.
Despite these concerns, Yellen offered a broadly optimistic view of the U.S. economy’s trajectory, affirming its strong growth and the resilience of the labor market.
“I absolutely believe it’s headed in the right direction,” Yellen said, adding that “our growth is extremely strong, the labor market is at least as strong as it was prior to the pandemic.”
Yellen remarked on the unprecedented success in maintaining unemployment rates below 4% for the longest period in 50 years.
Digital Assets: Yellen Calls for Regulatory Action
On the topic of digital assets, Yellen reiterated her view on the necessity for enhanced regulatory frameworks to manage the risks posed by the burgeoning sector.
She advocated for “the enforcement of applicable rules and regulations,” and urged Congress to “pass legislation to provide for the regulation of stablecoins and of the spot market for crypto assets that are not securities.”
Addressing Commercial Real Estate Concerns
Yellen’s concerns about commercial real estate stem from its potential impact on financial stability.
She detailed the FSOC and banking supervisors’ efforts to closely monitor and manage the sector’s risks, working collaboratively with banks to support borrowers facing difficulties. This targeted focus is part of a broader strategy to mitigate systemic risks and protect the financial system.
“I think office properties in some cities are of special concern because vacancy rates have increased and there have been declines in property value,” Yellen stated.
The VanEck Office and Commercial REIT ETF (NYSE:DESK), a gauge for the office real estate industry, is down 10% since the start of the year. City Office REIT Inc. (NYSE:CIO), a real estate firm specializing in premium office properties mainly in the southern and western metropolitan areas of the U.S., has experienced a decline of more than 50% over the last year and a 76% drop from its peak in 2021.
Rising US Public…
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