Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

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

Index Last Change % Change
Dow 17,798.49 -14.90 -0.08%
Nasdaq 5,127.53 11.39 0.22%
S&P 500 2,090.11 1.24 0.06%
Treasuries 2.22 -0.01 -0.31%
Data as of 10:08pm ET
Company Price Change % Change
General Electric Co 30.36 0.00 0.00%
Bank of America Corp... 17.48 0.04 0.23%
HP Inc 12.61 -0.03 -0.24%
Pfizer Inc 32.79 -0.08 -0.24%
Walt Disney Co 115.13 -3.54 -2.98%
Data as of 1:01pm ET


Sumner Redstone, the media mogul who controls Viacom and CBS, is at the center of a legal dispute. One side says he is practically unable to make decisions for himself. The other says he is "engaged and attentive." More

Gold futures hit a low of $1,051.60 an ounce, yet another reminder of just how out of favor gold has become since its all-time high of nearly $1,890 in 2011. More

Watsi crowdfunds donations to cover healthcare costs of those in need. And it's seeing a surprising trend: micro-donations via the popular Chinese social networking app, WeChat. More

Hive, a startup funded by the UN, is tasked with getting more Americans engaged with the refugee crisis. More

Facebook just increased the amount of paid time off new dads working at its international offices can take. More