Reform gives Federal Reserve lead over regulators’ council
The Obama Administration is to give the Federal Reserve increased powers to guard against future meltdowns, the Times reports, itself quoting from the Washington Post
Timothy Geithner, the Treasury Secretary, and Lawrence Summers, White House economic adviser, told The Washington Post that increasing capital and liquidity requirements for all financial institutions would be recommended.
Geithner said that the rules revamp would eliminate gaps in the financial system that encouraged risky behaviour leading up to last year’s financial crisis. “We had a financial system that was fundamentally too unstable and fragile, and it did a bad job of basic protection of consumers and investors,” Mr Geithner said. “Those are things we have to change.”
Firms that are too big to fail would face additional scrutiny by the Fed, effectively placing the central bank in charge of America’s biggest banks. Previously it was a role that the Fed shared with the Securities and Exchange Commission and the Federal Deposit Insurance Corporation. Also a council of regulators would be established with broad co-ordinated responsibility across the financial system.
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