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Non-Tech : Banks--- Betting on the recovery

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From: tejek	3/20/2010 3:25:52 PM
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Bernanke makes case for Fed to keep authority over small banks By Neil Irwin Washington Post Staff Writer Saturday, March 20, 2010; 12:30 PM The Fed to Congress: Don't take away our small banks. Top Federal Reserve officials are waging a public campaign to persuade lawmakers that their long-standing authority to regulate banks around the country -- including small and mid-size ones -- is integral to keeping the central bank attuned what is going on across the U.S. economy. Chairman Ben S. Bernanke articulated that message Saturday morning in a speech to the Independent Community Bankers of America in which he argued that the Fed is better able to monitor the U.S. economy because of its role overseeing 5,000 bank holding companies and 850 state-chartered banks around the country. Sen. Christopher J. Dodd (D-Conn.) has proposed stripping the central bank of those responsibilities in financial reform legislation that the Senate Banking Committee will take up Monday. The proposal would leave the Fed as the supervisor of only the three dozen or so largest banks. Dodd and others in Congress have argued that the Fed should be focusing more narrowly on managing the nation's monetary policy and ensuring the stability of the financial system overall -- and are particularly eager for the central bank to face consequences for its mistakes earlier in the decade that contributed to the financial crisis. But Bernanke and other Fed leaders are fighting the attempt to strip them of authority over small banks. Increasingly, they're turning away from the quiet persuasion of lawmakers -- the Fed's typical approach -- and toward making their case openly and vigorously. The data that the Fed uses to analyze the economy "often mask the diversity of the U.S. economy" and are backward looking, Bernanke said in his speech Saturday. "In contrast," he said, "the grass-roots information that we obtain from community bankers and the other community and business leaders who serve as Reserve Bank directors provides a forward-looking perspective on economic developments and concerns, as well as a level of detail and qualitative insight that is often lost in the aggregate numbers." Indeed, he described the Fed's role as a bank supervisor of all types of information as crucial ballast in keeping the Fed from being too focused on the interests of Wall Street firms and the views of officials in Washington. The Fed's supervision of banks is carried out by 12 regional banks around the country whose presidents also have a role setting the nation's monetary policy. read more......... washingtonpost.com

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