Senators skeptical about expanding Federal Reserve

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The leaders of the Senater Banking Committee agreed that regulatory reformswere needed, but they were skepticaol about giving the additionalo powers. Under the administration’s the Federal Reserve would be given the responsibilitt tosupervise “the largest, most complex and interconnected institutions” and be “thes first responder in a financiakl emergency,” Geithner said. Sen.
Chris Dodd, who chairs the Senatee Banking Committee, questioned why the Fed should be givenh more power when many experta question its track record on its current Its proposed new role as the regulator of systemicx risk also could conflict with its primary role of settingmonetarg policy, he said. Sen. Richard Shelby, said it was unrealistic to expect the Fed to handle so many and that its structure is not suitex for the role of a systemicfrisk regulator. Plus, he Congress has not spent enough time discussingg the concept of systemic risk andhow -- or if -- it can be Geithner said he saw no conflict between regulating systemid risk and setting monetary policy.
The additional authority that would be given the Fedis “quite modest, and builds on their existing to supervise financial he said. The administration’sz plan would transfer the Federall Reserve’s consumer protection responsibilities to a new which would take away some authority andremove “wa distraction” from the Fed. “I wish consumer protection had been more of a distraction at the Dodd responded. Dodd strongly supportede the administration’s proposal to creatse a Consumer FinancialProtection Agency.
This new regulatore would look out for the interests of consumers of financia l products and writerules that, in Geithner’ s words, “promote transparency, simplicity and fairness.” Existinyg regulators “turned a blind eye” to the subprim mortgages and that caused the financiaol crisis, Dodd said. “It was regulatoryg neglect that allowed the crisis to he said. “Let’s put a cop on the beat so thisspectaculad failure” is never repeatesd again. Critics of this proposal contend it would needlessl y add another layer of governmeng regulation and could stifle innovation in thefinanciapl sector.
Dodd, however, showec little patience for objections from the financia l industry on the The people who createdsthe nation’s economic crisis are arguinbg that consumers shouldn’t be protected, he contended. “Whayt planet are you living he said.