Bernanke: Fed should oversee all banks

By Julianne Pepitone, staff reporter


NEW YORK (CNNMoney.com) -- As Congress considers limiting the Federal Reserve's regulatory authority to just the country's largest bank holding companies, Fed Chairman Ben Bernanke reiterated on Saturday that the central bank should retain power over banks of all sizes.

"Because of the remarkable diversity of the U.S. financial system, a supervisory agency that focused only on the largest banking institutions, without knowledge of community banks, would get a limited and potentially distorted picture of what was happening in our banking system as a whole," Bernanke said in a speech to the Independent Community Bankers of America.

The talk echoed points Bernanke has made in several previous speeches, when he has argued that the supervision of small banks helps the Federal Reserve monitor the pulse of the "continent-spanning, highly varied" economy.

That "breadth of vision" informs the Fed's decision-making process when setting monetary policy, Bernanke said Saturday. He added that the Fed is the only body with the expertise to keep close watch on big banks as well as regional and community banks.

"Although it was not the case in the current crisis, instability can be generated by small institutions as well as by large ones--as occurred in the Great Depression or in the thrift crisis, to cite two particularly dramatic examples," he said.

Recent regulatory reform proposals aim to strip the Fed of policing these smaller community banks, arguing that its oversight should be focused on the 35 biggest bank holding companies.

A bill put forth by Senate Banking Committee Chairman Christopher Dodd, D-Conn., earlier this week would create a new consumer regulator housed inside the Fed to ensure fair dealings with mortgages and credit cards. It would also push banks to boost capital and create a new process for taking down giant failing companies without forcing Wall Street bailouts.

Bernanke addressed the bailout issue in his comments Saturday, saying "the pernicious problem of financial institutions that are deemed 'too big to fail'" is one of the biggest hindrances to recovery. 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 17,098.45 18.88 0.11%
Nasdaq 4,580.27 22.58 0.50%
S&P 500 2,003.37 6.63 0.33%
Treasuries 2.34 0.01 0.39%
Data as of 8:34pm ET
Company Price Change % Change
Bank of America Corp... 16.09 0.08 0.50%
Apple Inc 102.50 0.25 0.24%
Intel Corp 34.92 0.27 0.78%
Facebook Inc 74.82 0.96 1.31%
General Electric Co 25.98 -0.03 -0.12%
Data as of Aug 29

Sections

The deal would value Vice at $2.5 billion. The online media company would also create content for the cable network, delivering a wider audience. More

Gas prices are falling to nearly $3 a gallon in some parts of South Carolina, and that will soon be common in much of the country. More

Netflix told the FCC that its speed on the Comcast network became so slow that customers began dropping their service. More

The Coolest Cooler is the most successful Kickstarter campaign in the site's history, raising $13.3 million from over 62,000 backers. 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.