Bernanke: do not rein in Fed
THE US Federal Reserve should keep its powers to regulate banks of all sizes, chairman Ben Bernanke insisted yesterday.
Fighting back against proposals that could see the central bank stripped of most of its supervisory powers, Bernanke argued the Fed’s duties to set interest rates and regulate lenders were closely connected.
He told the House of Representatives: “The Reserve’s oversight of banks of all sizes significantly improves its ability to carry out its central banking functions, including making monetary policy… and fostering financial stability.”
Equally, Bernanke said the Fed’s experience controlling money supply meant it had the knowledge “in each of [the] areas critical for effective consolidated supervision”.
The Fed has come under fire for missing signs of economic stress in the run-up the financial crisis. Senate banking committee chairman Christopher Dodd calls the body’s supervision record “abysmal” and has put forward plans that would see the Fed’s role scaled back from looking after 5,850 banks to overseeing just 35 of the largest institutions.
Without referring directly to the report, Bernanke said smaller banks were essential to the Fed’s mandate.