MarketWatch.com reports today that the Fed chief, Ben Bernanke, is seeking more power to oversee investment banks. According to an excerpt from that article:
WASHINGTON (MarketWatch) — The Federal Reserve should have a much larger role in supervising investment banks to prevent and limit financial market turmoil, Federal Reserve Chairman Ben Bernanke said Tuesday, endorsing an expansion of the central bank’s authority into new territory.
Yes, it does seem that Mr. Bernanke is seeking more power and thinks Congress could help him accomplish his goals. According to a paragraph excerpt of his speech posted this morning:
“Fed-SEC cooperation is taking place within the existing statutory framework with the objective of addressing the near-term situation. In the longer term, legislation may be needed to provide a more robust framework for the prudential supervision of investment banks and other large securities dealers. In particular, under current arrangements, the SEC’s oversight of the holding companies of the major investment banks is based on a voluntary agreement between the SEC and those firms. Strong holding company oversight is essential and thus, in my view, the Congress should consider requiring consolidated supervision of those firms, providing the regulator the authority to set standards for capital, liquidity holdings, and risk management.2 More generally, in the longer term, the Congress should consider whether our current regulatory structure needs to be modernized to address the changes that have occurred in the structure of the financial system, including the enormous growth of nonbank financial institutions and the development of new financial products.”
I’m sure that Mr. Bernanke consulted with many other colleagues and advisers before he presented his oversight plans. Of course, we all know that one of his biggest proponents is Treasury Secretary Henry Paulsen, who also wants more federal oversight in the financial markets.
But what wasn’t mentioned anywhere else, was his consultations with a more trusted expert on power, which may have given him just the edge he needed to take on such an unprecedented task.
Let me know if you’ve found something to the contrary.
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