Bernanke Testifies Before Congress on Banking Regulatory Reforms
Congress should give a single federal regulator enhanced power to set standards for the capital, liquidity and risk management of investment banks, according to Federal Reserve Chairman Ben S. Bernanke.
"Reforms in the oversight of these firms must recognize the distinctive features of investment banking,'' Bernanke said today in remarks prepared for testimony before the House Financial Services Committee. Federal supervisors must take care not "to induce a migration of risk-taking activities to less-regulated or off-shore institutions.''
The Fed is discussing with other federal agencies overhauling regulation of financial institutions following the near-bankruptcy of Bear Stearns Cos. and market turmoil triggered by the collapse of the subprime mortgage market. Bernanke didn't specify which federal agency needs more power.
"The evidence is now clear that we are in one of the most serious economic troubles that we have seen recently because in part of an inadequacy of regulation,'' Representative Barney Frank, the committee chairman and a Massachusetts Democrat, said in opening remarks. There's a consensus among regulators and lawmakers that "an increase of regulation is required.''
The world's largest banks and securities firms have reported $404 billion in asset write-downs and credit losses since the start of last year. The Standard and Poor's Financials Index, which includes 89 banks, brokers and insurance companies, has tumbled 46 percent over the past 12 months.
Congress should consider rules and mechanisms for liquidating "a systematically important securities firm that is on the verge of bankruptcy,'' Bernanke said. Lawmakers should also weigh creating ``consolidated supervision of these firms.''
The Fed chairman in his written remarks didn't refer to the economy or interest rates, topics he'll discuss during his semi- annual testimony before the House and Senate next week. U.S. Treasury Secretary Henry Paulson Jr. also testifies today.
The Fed chairman's remarks repeated themes he stated earlier this week at a Federal Deposit Insurance Corp. conference.
"The financial turmoil is ongoing,'' Bernanke said. "Our efforts today are concentrated on helping the financial system return to more normal functioning.''
The U.S. Treasury published in March a "blueprint'' for a new U.S. financial regulatory system. The plan calls for tighter oversight of mortgage lending and says the Fed should become the "market stability regulator,'' with broad access to information about the health of financial institutions.
Published on July 10, 2008
Are you a retail Agent Looking for a Quote?