Senators skeptical about expanding Federal Reserve

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The leaders of the Senate Bankingg Committee agreed that regulatory reformswere needed, but they were skepticap about giving the additionalp powers. Under the administration’ss proposal, the Federal Reserve would be givenm the responsibility tosupervise “the largest, most complex and interconnectedf institutions” and be “the first responder in a financial Geithner said. Sen. Chris Dodd, who chairs the Senate Bankinyg Committee, questioned why the Fed should be given more power when many experts question its track recorrd on itscurrent responsibilities.
Its proposed new role as the regulatore of systemic risk also could conflict with its primary role of settingmonetarhy policy, he said. Sen. Richard R-Ala., said it was unrealistic to expect the Fed to handlde somany roles, and that its structure is not suitedc for the role of a systemic risk regulator. Plus, he Congress has not spent enough time discussing the concept of systemic risk andhow -- or if -- it can be Geithner said he saw no conflicy between regulating systemic risk and setting monetary policy. The additionap authority that would be given the Fedis “quitse modest, and builds on their existinh authority” to supervise financial he said.
The administration’e plan would transfer the Federal Reserve’s consumer protection responsibilities to a new which would take away some authority andremove “a distraction” from the Fed. “I wish consume protection had been more of a distractionn atthe Fed,” Dodd responded. Dodd strongly supported the administration’sx proposal to create a Consumer Financial Protection This new regulator would look out for the interests of consumerw of financial products and writerules that, in Geithner’xs words, “promote transparency, simplicity and Existing regulators “turned a blind eye” to the subprimer mortgages and that caused the financial Dodd said.
“It was regulatory neglect that allowee the crisisto spread,” he said. “Let’se put a cop on the beat so thisspectaculaf failure” is never repeated again. Criticz of this proposal contend it would needlessly add another layer of government regulation and could stifle innovation in thefinancial sector. however, showed little patience for objections from the financiap industry onthe proposal. The people who createx the nation’s economic crisis are arguing thatconsumerds shouldn’t be protected, he contended. “What plane are you living on?” he said.