2nd UPDATE: Dodd Bill Would Strip Fed Of Key Banking Powers
By Luca Di Leo Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- The financial-regulatory overhaul proposed by U.S. Sen. Christopher Dodd on Tuesday represents a head-on attack on the Federal Reserve's powers of bank supervision and lending.
Senate Banking Committee Chairman Dodd's (D., Conn.) bill would take away the Fed's emergency-lending powers to prop up individual banks, which the central bank used during the financial crisis to save several big firms from collapse.
The wide-ranging measure would effectively leave the Fed responsible just for monetary policy, stripping almost all of its bank-oversight and consumer-protection powers.
Bank oversight, which is currently shared by the Fed and the Federal Deposit Insurance Corp., would be consolidated into a single regulator--the Financial Institutions Regulatory Administration--in charge of supervising all banks and bank-holding companies, even the country's largest and most complex institutions.
The new agency would be funded through a transfer of monies from the Federal Reserve as well as assessments on the institutions it oversees.
Speaking at a press conference to unveil the draft legislation, Dodd said the Fed had been an "abysmal failure" in regulating bank holding companies and protecting consumers in recent years.
While he didn't intend his bill to be "punitive" towards the Fed, Dodd said he wanted the central bank to return to focusing on its "core enterprises" of monetary policy and serving as the lender of last resort.
U.S. central-bank officials have strongly resisted proposals to strip their authority, such as the Fed's current oversight of 800 banks and 5,000 bank-parent companies.
The Fed will evaluate the draft in light of its responsibilities for promoting economic growth, price stability, employment and financial stability, a Fed spokeswoman said.
"Three key principles will guide our considerations: preserving our ability to effectively carry out the nation's monetary policy; strengthening our ability to promote financial stability; and maintaining the crucial independence of the work of the central bank," she said.
Fed Chairman Ben Bernanke said last month that the central bank's ability to conduct an "effective monetary policy" depended heavily on its role as a bank supervisor.
The Dodd bill also includes provisions that would change the way the Fed chooses directors at the central bank's 12 regional banks, putting more power in Washington and giving the White House and Senate a say in who runs those banks.
San Francisco Fed President Janet Yellen said Tuesday that, though she believes the Fed should play an increasingly central role in monitoring systemic risk, regional banks shouldn't face a diminution of their roles.
"I think we have something very valuable with the Federal Reserve system and the way it works," she said. "Congress set it up to center power not 100% with Washington [but to give] people based in other parts of the country eyes and ears and [to enable them to] have some say over monetary policy. That has served our country very well."
The Fed has an unusual structure that mixes public and private interests. The Federal Reserve Board in Washington, which plays the dominant role in setting interest rates, is appointed by the president and its members are confirmed by the U.S. Senate. But the Fed system also includes 12 regional banks, each of which has a nine-member board of directors chosen from the private sector.
The Dodd bill sets the legislative chamber on a collision course with both the House of Representatives and the Obama administration, which have championed different approaches to revamp financial-market regulation.
-By Luca Di Leo, Dow Jones Newswires; 202-862-6682; luca.dileo@dowjones.com
(Corey Boles, Michael R. Crittenden, and Jessica Hodgson contributed to this article.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=QfH2r6Cl9SvBxovETZx1rA%3D%3D. You can use this link on the day this article is published and the following day.
Publié le 10 novembre 2009 Copyright © 2009 Dowjones
Partager sur:
