Federal Reserve Chairman Ben Bernanke says that a central economic organization in Europe would help solve some of that continent’s economic crises.
“If Europe had a single fiscal authority, that would put them in a much closer situation relative to the United States,” Bernanke said today. “That would probably address many of the concerns, many of the problems that they had.”
European leaders promised this summer the creation of such an organization, but even optimistic outlooks say its creation could take months or years. Even then, critics fear that like many European Union organizations it may not have the teeth to police its member states.
Speaking during a townhall to public educators in Washington, Bernanke admitted “getting to that point is very difficult.”
“You have 17 different countries,” he said. “Each set of taxpayers want to make sure that their own country is being fairly treated.”
Turning his attention to the future, the Fed chairman also said newer regulatory measures including the Dodd-Frank Act and the Basel, Switzerland, accords were needed to prevent crises over the horizon.
The Dodd-Frank bill imposed new financial regulations on the nation’s financial services industry intended to prevent another massive bailout. The Basel Accords are an international agreement on standardized risk based capital requirements for banks.
Bernanke credited Dodd-Frank with providing shared infrastructure across U.S. government agencies to “to take steps to provide a warning” against possible downturns.
At the international scale, Bernanke extolled the Basel accords for mandating increased reserve capital requirements across the largest banks. The measure, he said, was designed to make the financial system “as resilient as possible” by giving banks a larger cushion with which to sustain losses.
On Capitol Hill today some lawmakers are saying Basel didn’t go far enough. Bloomberg News reports Sens. David Vitter, R-La., and Sherrod Brown D-Ohio, have asked the Fed to implement a surcharge with Basel “significant enough to change the incentives for the largest banks.”