Bernanke: Fed should monitor all banks

By Jennifer Liberto, senior writer


WASHINGTON (CNNMoney.com) -- Fed Chairman Ben Bernanke made his strongest case yet to Congress on Wednesday for the Federal Reserve keeping its regulatory oversight powers over banks large and small.

Bernanke told the House Financial Services panel he's "quite concerned" about proposals to limit the Federal Reserve's regulatory power to watching out for only the biggest banks. He called the proposal a "bad idea."

"It makes us the 'too big to fail' regulator, and we don't want that responsibility," Bernanke said. "We need a connection to Main Street, as well as Wall Street."

Bernanke said the Fed, alone, has the infrastructure and expertise to keep a close eye on big banks as well as regional and community banks. He suggested that losing the ability to monitor smaller banks would impact the Fed's role in stablizing the economy.

"The Federal Reserve's participation in the oversight of banks of all sizes significantly improves its ability to carry out its central banking functions, including making monetary policy, lending through the discount window, and fostering financial stability," Bernanke said.

Earlier this week, Senate Democrats released a draft of financial overhaul that would strip the Fed of overseeing all but the largest three dozen bank holding companies -- those with more than $50 billion in assets.

By contrast, under the House version, the Federal Reserve would keep most of its bank supervisory duties.

However, House Financial Services Chairman Barney Frank, D-Mass., said he held the hearing because some on his panel are now more willing to consider stripping more regulatory powers from the Fed.

"There's been some movement and the differences (about the role of the Fed) are less than they were," Frank said at the beginning of the hearing. "The desire and the need for a need for a bill will be greater than any individual differences. And an important part of this will be how the head of the Fed should be structured."

Bernanke has consistently fought to retain the Fed's oversight power over banks, although he has been open to the possibility of losing some powers to protect consumers and submitting to some sort of Congressional review that doesn't impact monetary policy.

In his testimony, the Fed chair pointed to the financial crisis as evidence of the importance of keeping those in charge of monetary policy also in charge of banking supervision.

"The financial crisis has made clear that all financial institutions that are so large and interconnected that their failure could threaten the stability of the financial system and the economy must be subject to strong consolidated supervision," Bernanke said.

Former Fed Chairman Paul Volcker also wholeheartedly defended the Fed's ability to continue as the supervisor of smaller banks.

"Monetary policy and concerns about the structure and condition of banks and the financial system more generally are inextricably intertwined," Volcker said. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,122.01 15.31 0.09%
Nasdaq 4,569.62 -1.02 -0.02%
S&P 500 2,000.12 0.10 0.00%
Treasuries 2.36 -0.03 -1.25%
Data as of 11:48pm ET
Company Price Change % Change
Bank of America Corp... 16.20 -0.13 -0.80%
Apple Inc 102.13 1.24 1.23%
Facebook Inc 74.63 -1.33 -1.75%
Yahoo! Inc 38.18 0.39 1.03%
Pfizer Inc 29.49 0.28 0.96%
Data as of 4:02pm ET

Sections

Staggering interest from the Chinese in an immigration program has led the U.S. to run out of available visas for the first time ever. More

Former Fed chief Ben Bernanke believes the 2008 financial crisis was the worst in global history, topping even the Great Depression. More

Snapchat has gotten a $20 million funding round from Kleiner Perkins, valuing the company at $10 billion, according to the Wall Street Journal. More

Utah State professor Michael Glauser cycled 4,000 miles this summer, visiting 100 entrepreneurs across the country. Here's a snapshot of how they grew their businesses. More

Five CNNMoney readers share stories about saving that you can learn from: What they would do differently if they had another chance. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.