Lawmakers unsure Fed is up to oversight job
WASHINGTON -- President Obama's plan to transform the Federal Reserve into a super-regulator ran into skepticism Thursday from lawmakers who worry that the central bank is not the best suited to keep an eye on firms deemed so big and influential that their demise could hurt the economy.
Democrats and Republicans voiced misgivings as Treasury Secretary Timothy Geithner began a day of selling Obama's financial regulatory plan to give the Fed more authority, create a new consumer protection agency and bring unregulated sectors of the financial markets under government oversight.
"I do not believe that we can reasonably expect the Fed or any other agency to effectively play so many roles," said Sen. Richard Shelby, R-Ala., noting that it also sets monetary policy, regulates banks and handles an array of other functions.
Some lawmakers have called for a council of regulators, not a single agency, to oversee and regulate large institutions.
The administration did propose a council to watch for products and trends that could pose widespread risks, but chose not to give it regulatory power to supervise specific institutions.
"You cannot convene a committee to put out a fire," Geithner said.
Sen. Mark Warner, D-Va., argued that a council represented by the Fed, the Treasury and regulators could be better equipped than the Fed alone to recognize and act on institutional risks that could harm the financial markets.
"I don't believe it would have to be a debating society," he said, adding that the council proposed by the administration is "emasculated."
Committee Chairman Christopher Dodd, D-Conn., also raised questions about the use of the Fed for such an overarching task over the financial system and blamed it for "dropping the ball" on consumer protections. But he applauded the administration for including a new agency to protect consumers in their banking transactions.
Noting that banking interests already are criticizing the new agency, Dodd said: "The very people who created the damn mess are the ones now arguing that consumers ought not to be protected."
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