Xinhua (Link) (June 19, 2009)
U.S. Treasury Secretary Timothy Geithner said on Thursday that the Federal Reserve is best suited to become a super regulator to oversee large institutions whose failure could threaten the stability of the entire system.
"The Federal Reserve is best positioned to play that role," said Geithner in testimony before the Senate Banking Committee. "It already supervises and regulates bank holding companies, including all major U.S. commercial and investment banks."
"Our plan gives a modest amount of additional authority -- and accountability -- to the Fed to carry out that mission. But it also takes some authority away," said the Treasury chief.
According to the rules unveiled by U.S. President Barack Obama Wednesday, large, interconnected firms whose failure would threaten the financial system's overall stability would face new consolidated supervision by the Federal Reserve.
The reform also will create a council of regulators with broad coordination responsibility across the financial system.
"This Council will fill gaps in the regulatory structure where they exist. It will improve coordination of policy and resolution of disputes," Geithner explained in the testimony. "And, most importantly, it will have the power to gather information from any firm or market to help identify emerging risks."
"The Council does not have the responsibility for supervising the largest, most complex and interconnected institutions. The reason is simple: that is a specialized task, which requires tremendous institutional capacity and organizational accountability," said Geithner.
"Nor would the council be an appropriate first responder in a financial emergency. You don't convene a committee to put out a fire," he added. †
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