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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: gpowell who wrote (53725)	2/13/2006 3:16:21 PM
From: shades	of 110194

=DJ Shadow Panel Wants Fed Out Of Bank Supervision Role By Brian Blackstone Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--A panel of academic experts Monday urged that the Federal Reserve exit its role as regulator of financial firms, saying the task clouds the central bank's primary mission of price stability and maximum employment. "The crucial mission of the Fed lies in directing its monetary operations to fighting inflation and maintaining employment," the Shadow Financial Regulatory Committee wrote in an open letter to Fed Chairman Ben Bernanke. "To compromise this mission by undertaking supervisory tasks threatens its prestige and distracts from its proper focus on macroeconomic stability," the group stated. The shadow committee's co-chairmen are George Kaufman of Loyola University in Chicago and Richard Herring of the University of Pennsylvania. Randall Kroszner, a University of Chicago professor nominated to fill one of the vacant Fed governor positions, formerly was a member of the Shadow Financial Regulatory Committee, which has been around for about two decades. The shadow committee contended in its letter to Bernanke that few central banks in the world have the same supervisory role that the Fed does, and that those tasks can be better handled by the Office of Comptroller of the Currency and the Federal Deposit Insurance Corp. Such a change in the Fed's role would require legislation. Assuming the Fed does retain its supervision role, the panel urged the central bank to use FDIC leverage ratios as a supervisory guide and not capital requirement ratios as defined by the Basel II international framework. It also suggested that policymakers take a more friendly view of affiliations between banks and commercial firms, an issue that has gained prominence with Wal-Mart Stores Inc.'s (WMT) interest in operating banks. The Fed's "reluctance to allow affiliations between commercial firms and banking organizations .. enmesh the Fed in efforts by commercial firms to block competition from banks and by banks to avoid competition from nonbanks," the panel stated. The experts also encouraged Bernanke to "continue former (Fed) Chairman (Alan) Greenspan's opposition to permitting Fannie Mae and Freddie Mac to invest in mortgage-backed securities or to hold portfolios of mortgages beyond those earmarked for near-term securitization." -By Brian Blackstone; Dow Jones Newswires; 202-828-3397; brian.blackstone@dowjones.com (END) Dow Jones Newswires February 13, 2006 15:04 ET (20:04 GMT) Copyright (c) 2006 Dow Jones & Company, Inc.- - 03 04 PM EST 02-13-06

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