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 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

Index Last Change % Change
Dow 16,058.35 -469.68 -2.84%
Nasdaq 4,636.11 -140.40 -2.94%
S&P 500 1,913.85 -58.33 -2.96%
Treasuries 2.17 -0.03 -1.27%
Data as of 7:08pm ET
Company Price Change % Change
Bank of America Corp... 15.58 -0.76 -4.65%
Apple Inc 107.72 -5.04 -4.47%
General Electric Co 23.88 -0.94 -3.79%
Ford Motor Co 13.72 -0.15 -1.08%
Microsoft Corp 41.82 -1.70 -3.91%
Data as of 4:00pm ET
Sponsors

Sections

McDonald's has been testing an all-day breakfast menu in several markets for months. Now it has said when the change will go nationwide: October 6. More

Iran could be pumping more than four million barrels of oil a day by the end of 2016, the country's oil minister tells CNN in an exclusive interview. More

The Federal Aviation Administration approved the largest ever fleet of commercial drones owned by a company called Measure. More

How do you run a successful crowdfunding campaign? Indiegogo's CEO Slava Rubin offers his top tips and mistakes to avoid. More

Here's what you need to earn to afford a home in the 27 biggest metro areas in the country, according to HSH.com. More