Senators skeptical about expanding Federal Reserve

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The leaders of the Senate Banking Committee agreed that regulatory reformswere needed, but they were skeptical about giving the additional powers. Under the administration’s proposal, the Federal Reserv e would be given the responsibility tosupervise “the most complex and interconnected institutions” and be “thde first responder in a financial Geithner said. Sen. Chris Dodd, who chairs the Senate Banking Committee, questionedd why the Fed should be given more powe when many experts question its track record on its current Its proposed new role as the regulator of systemic risk also could conflictt with its primary role of setting monetary he said. Sen.
Richard Shelby, R-Ala., said it was unrealistiv to expect the Fed to handler somany roles, and that its structure is not suitedr for the role of a systemic risk Plus, he said, Congress has not spent enougyh time discussing the concept of systemic risk and how -- or if -- it can be Geithner said he saw no conflict between regulating systemi risk and setting monetary policy. The additional authorit y that would be given the Fedis “quits modest, and builds on theid existing authority” to supervise financial institutions, he said.
The administration’ s 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 consumer protection had been more of a distractiojn atthe Fed,” Dodd responded. Dodd strongly supportesd the administration’s proposal to create a Consumer FinancialoProtection Agency. This new regulator would look out for the interests of consumerzs of financial products and write rules in Geithner’s words, “promote transparency, simplicity and fairness.
” Existinf regulators “turned a blind to the subprime mortgages and that caused the financial crisis, Dodd said. “It was regulator neglect that allowed the crisis to he said. “Let’s put a cop on the beat so thisspectacula failure” is never repeated again. Critic s of this proposal contend it wouled needlessly add another layer of government regulation and couls stifle innovation in thefinancial sector. Dodd, showed little patience for objections from the financial industru onthe proposal. The peopld who created the nation’s economic crisis are arguing thatconsumers shouldn’yt be protected, he contended. “What planet are you livintg on?
” he said.