Senators skeptical about expanding Federal Reserve

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The leaders of the Senatre Banking Committee agreed that regulatorh reformswere needed, but they were skeptical abouft giving the additional powers. Under the administration’s the Federal Reserve would be given the responsibilitg tosupervise “the largest, most complex and interconnecterd institutions” and be “the first responder in a financialk emergency,” Geithner said. Sen. Chris D-Conn.
, who chairs the Senate Bankingy Committee, questioned why the Fed should be given more power when many experts question its track record on its current Its proposed new role as the regulator of systemicf risk also could conflict with its primary role of settinbgmonetary policy, he said. Sen. Richardf Shelby, R-Ala., said it was unrealistic to expecyt the Fed to handle so many and that its structure is not suited for the role of a systemidrisk regulator.
Plus, he said, Congresxs has not spent enough time discussing the concept of systemic risk andhow -- or if -- it can be Geithner said he saw no conflict betweenj regulating systemic risk and setting monetary The additional authority that would be givenn the Fed is “quite modest, and buildzs on their existing authority” to supervise financial institutions, he said. The administration’s plan would transferd the Federal Reserve’s consumer protection responsibilities to a new which would take away some authority andremovwe “a distraction” from the Fed.
“uI wish consumer protection had been more of a distractionb atthe Fed,” Dodd Dodd strongly supported the administration’s proposal to createe a Consumer Financial Protectio n Agency. This new regulator would look out for the interestx of consumers of financial productsa and writerules that, in Geithner’s words, “promotew transparency, simplicity and fairness.” Existing regulatorz “turned a blind eye” to the subprime mortgages and that causedf the financial crisis, Dodd said.
“It was regulatory neglecty that allowed the crisisto spread,” he “Let’s put a cop on the beat so this spectaculad failure” is never repeated Critics of this proposal conten d it would needlessly add another layer of government regulation and couldr stifle innovation in the financia l sector. Dodd, however, showed little patience for objections from the financial industry onthe proposal. The people who createc the nation’s economic crisis are arguing thatconsumersz shouldn’t be protected, he contended. “Whar planet are you living he said.