Bernanke seeks new powers for Fed

[David Octavius]

Bernanke seeks new regulatory powers for Fed - MarketWatch

WASHINGTON (MarketWatch) - Federal Reserve Chairman Ben Bernanke said Tuesday that the Fed should have additional powers to prevent and limit financial market turmoil.



Congress should consider giving the Fed power to set standards for capital liquidity holdings and risk management for investment banks, Bernanke said.
In the past, the Securities and Exchange Commission has been the primary regulator of broker dealers.


In addition, Congress might give the Fed broad power to promote financial market stability, Bernanke said.


If Congress makes this choice, "I do not think the Fed could fully meet these objectives without the authority to directly examine banks and other financial institutions that are subject to prudential regulation," Bernanke said.


Bernanke spoke at a conference on lending to low- and middle-income borrowers, sponsored by the Federal Deposit Insurance Corp. Bernanke did not discuss the economic outlook in his remarks.
Loans to brokers may be extended


In addition, Bernanke said the Fed is considering extending its emergency loans to broker-dealers beyond 2008, Bernanke said.


"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end," Bernanke said.


In March, as market conditions worsened, the Fed established two lending facilities for brokerages. One allows them to swap a range of illiquid assets for Treasury securities. The other facility provides cash to broker dealers in a system that is similar to its discount window for banks.
Turf battle


Increased power for one agency typically comes at the expense of other agencies that have their own strong alliances with powerful members of Congress.


Although Treasury Secretary Henry Paulson has said that he would like to see Congress give the Fed more power to ease the fallout of financial market turmoil on the economy, it is another matter for an agency to be seen as seeking power for itself.


As a result, Bernanke bent over backwards to suggest, rather than demand, that the Fed get broad new regulatory responsibilities.


But it was clear from his remarks that the Fed wants new powers.


"This is the first time I ever recall the Fed coming out and arguing that it needs to have expanded oversight and responsibilities," said former Fed official Robert Eisenbeis in comments to Bloomberg television.


"The Fed is seeking broad oversight responsibilities that have been rejected in the past," Eisenbeis said.


It is a wide open question what Congress will ultimately decide to do about the glaring inadequacies of the regulatory system that have come to light in the financial market crisis that began last summer.


Lobbyists for the financial market industries have made careers provoking, easing and maneuvering around battles over regulatory turf.


Under previous Fed chief Alan Greenspan, the Fed was an aggressive agency in terms of regulatory authority, perfectly willing to use sharp elbows against other regulators. As a result, some ill feeling lingers.
The Fed would like greater authority to get detailed information about money markets and the activities of borrowers and lenders in those markets, Bernanke said.


The surprising freeze-up of money markets last August was one of the first signs of trouble for financial markets.


Bernanke said that "a strong case" could be made for granting the Fed explicit oversight authority over systemically important payment and settlement systems

I don't like this move at all - I believe that SOME regulation is necessary but only so much as to prevent or punish overt fraud. Giving one agency this kind of power increases the chances that it will make mistakes that will hurt the economy more than if the market made the mistakes themselves.

[WickedLou9]

I can see setting floors for capital liquidity... but risk management? That's sort of wishy washy to begin with. You can put numbers down to represent risk but there are a mutitude of formluas and assumptions that go into it. One persons definition of risk might not be anothers.
I'm also not sure what they mean by "to promote stability". How ?

[thewise1]

When even you guys are saying 'wtf regulation', I know I'm going to hate it

[6SpeedTA95]

I think his intentions are good like so many other government power grabs, but the results coudl be disasterous. This is NOT good.

[Rouger2]

You don't know, and I don't know if he needs more authority and we have no one up there in congress that knows so we are up a shit creek. He may need it. Certianly we are in a mess economically and we know dam well it is because our protectors congress and the regulators have been in bed with big business. Bernake seens like an alright guy I would tend to think we should do what he says, but who knows. In the past they let us lose our shirt to China and now china has us by the balls and are probably responcible for the high cost of gas. They have billions and billions and billions of our dallors to ante up the price of oil with because of our crazy crazy trade deficit. The people who allowed it should be shot. All those weak stupid presidents we have had from Reagan to now are responcible.

[6SpeedTA95]

Originally Posted by Rouger2

You don't know, and I don't know if he needs more authority and we have no one up there in congress that knows so we are up a shit creek. He may need it. Certianly we are in a mess economically and we know dam well it is because our protectors congress and the regulators have been in bed with big business. Bernake seens like an alright guy I would tend to think we should do what he says, but who knows. In the past they let us lose our shirt to China and now china has us by the balls and are probably responcible for the high cost of gas. They have billions and billions and billions of our dallors to ante up the price of oil with because of our crazy crazy trade deficit. The people who allowed it should be shot. All those weak stupid presidents we have had from Reagan to now are responcible.

So because he "may" need it we give him power? the government may need to confiscate my house or they may need to listen to my phone conversations without my permission, that doesn't make it right, constitutional or something that we should bend over and take because the unintended consequences can be disasterous. The government doesn't need more power.

[Fed Up]

What I find ironic is the creator of bubbles is trying to now regulate those entities that didn't play their game well. They've been bailing them out since last year and consistently exchange Treasuries for the "illiquid" assets (otherwise known as collateral) of the troubled financial institutions.

What becomes of those illiquid assets? Ask your congressman that question. They'll stare at you with a blank face and try and change the subject.

Even the Fed doesn't answer that question.

But we all know where the money will come from that bails out their buddies.

But hey...don't listen to me...I'm one of those "pro-gold" guys! I'm a "kook" like Ron Paul! Either way, my opinions (based on my own research) can't be changed by mere majority. I'm used to being in the minority... You'll find me here in September: The Mises Circle in Vancouver Sponsored by Almaden Minerals Ltd.

BTW, there were a few warnings;

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802)

"The paper-money system and its natural associations--monopoly and exclusive privileges--have already struck their roots too deep in the soil, and it will require all your efforts to check its further growth and to eradicate the evil. The men who profit by the abuses and desire to perpetuate them will continue to besiege the halls of legislation in the General Government as well as in the States, and will seek by every artifice to mislead and deceive the public servants. It is to yourselves that you must look for safety and the means of guarding and perpetuating your free institutions. In your hands is rightfully placed the sovereignty of the country, and to you everyone placed in authority is ultimately responsible."
-Andrew Jackson, Farewell Address, 3/4/1837

The "system" also leads to the funding of undeclared wars, but that's another topic.

Fed Up

[thewise1]

I would love to go to that thing in vancouver.

[Rouger2]

Originally Posted by 6SpeedTA95

So because he "may" need it we give him power? the government may need to confiscate my house or they may need to listen to my phone conversations without my permission, that doesn't make it right, constitutional or something that we should bend over and take because the unintended consequences can be disasterous. The government doesn't need more power.

Well I don't know about all that, but if he needs the regulations to fix the problem he needs them. Like I said you and I don't know if he does so I can only say he may need them.

[Spideynw]

Originally Posted by Rouger2

Well I don't know about all that, but if he needs the regulations to fix the problem he needs them. Like I said you and I don't know if he does so I can only say he may need them.

No, we know whether he does or not, and he does NOT need them. How do I know? Because he has no proof that he does need them.

[Ardentfrost]

Originally Posted by Spideynw

No, we know whether he does or not, and he does NOT need them. How do I know? Because he has no proof that he does need them.

Giving him powers based on the assumption he might need them is pretty much the worst possible thing to do.

[kombayn]

Originally Posted by Ardentfrost

Giving him powers based on the assumption he might need them is pretty much the worst possible thing to do.

+1!

[Dumpy Dooby]

I say we go for it. I'm sick of our economy swirling down the johnson. I think this decision would effectively yield the industrial high pressure toilet that we would need in order to expedite the process of flushing our economy down the drain.

Maybe the Chinese will buy Bernanke a bidet after he shits all over the place.

[Rouger2]

Originally Posted by Ardentfrost

Giving him powers based on the assumption he might need them is pretty much the worst possible thing to do.

I can't give him any powers. I can only guess and my best guess, based on what I know is that he needs them. Those so well informed congressmen will surely know for sure if he needs them.

[thewise1]

Originally Posted by Rouger2

I can't give him any powers. I can only guess and my best guess, based on what I know is that he needs them. Those so well informed congressmen will surely know for sure if he needs them.

Such faith in such faithless people

[Rouger2]

Originally Posted by thewise1

Such faith in such faithless people

Yea I know. I was being sarcastic.

[Spideynw]

Originally Posted by Rouger2

I can't give him any powers. I can only guess and my best guess, based on what I know is that he needs them. Those so well informed congressmen will surely know for sure if he needs them.

You mean the people that won a popularity contest?

[kombayn]

YouTube Video

Ben Bernanke in this video admits that inflation is a tax.