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|---|---|---|
 Donald Trump | ||
Pennsylvania |  Joe Biden |
Bernanke says Fed can take on supercop role
WASHINGTON -- Federal Reserve Chairman Ben Bernanke on Tuesday fended off congressional skepticism about expanding the Fed's duties to police big financial companies given the central bank's failure to catch problems that led to the financial crisis.
Bernanke also faced some grilling from the House Financial Services Committee about taxpayer bailouts of financial companies, slow moving efforts to curb home foreclosures and concerns about the Fed's track record in protecting consumers from abusive practices from lenders, credit card companies and other financial service providers.
"The Fed has made some big mistakes," said the panel's highest-ranking Republican, Spencer Bachus of Alabama. Letting the Fed become the financial supercop would be "just inviting a false sense of security" that would be shattered at taxpayers' expense, he warned.
Bernanke argued that the Obama administration's proposal would be a "modest reorientation" of the Fed's powers, not a great expansion of them.
The Fed chief also sought to beat back an administration proposal that would create a new consumer protection regulator for financial services and strip some of those duties from the central bank.
Consumer groups and lawmakers have blamed the Fed for not cracking down early on dubious mortgage practices that fed the housing boom and figured into its collapse. Later this week, the Fed will issue a proposal boosting disclosures on mortgages and home equity lines of credit. It also will include new rules governing the compensation of mortgage originators.
Bernanke urged Congress to keep proposals to audit the Fed away from monetary policy duties. "A perceived loss of monetary policy independence could raise fears about future inflation," he warned.
Ron Paul, R-Texas, a frequent Fed critic, rejected that argument and said the Fed already makes political calculations.
"Just the fact that (the Fed) can issue a lot of loans and special privileges to banks and corporations," Paul said. "That's political."
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