Hands dirty

18 June 2009 By Edward Hadas Follow @edwardhadas

If Congress approves Obama’s reforms, the Fed will get macroprudential powers. That makes its agenda more complicated and political. But the scheme only ratifies reality. The crisis had already killed off the notion that monetary authorities could work in ivory towers.

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In his June 17 speech on reform of financial regulation, President Obama's said, I am proposing that the Federal Reserve be granted new authority and accountability for regulating bank holding companies and other large firms that pose a risk to the entire economy in the event of failure.

Richard Shelby, a Republican senator from Alabama, said of the Obama proposal I do not believe that we can reasonably expect the Fed or any other agency to effectively play so many roles".

According to the Federal Reserve, its current duties fall into four general areas:

• conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate longterm interest rates

• supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers

• maintaining the stability of the financial system and containing systemic risk that may arise in financial markets

• providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system

Link to Treasury release

Context News

Richard Shelby, a Republican senator from Alabama, said of the Obama proposal I do not believe that we can reasonably expect the Fed or any other agency to effectively play so many roles".

According to the Federal Reserve, its current duties fall into four general areas:

• conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate longterm interest rates

• supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers

• maintaining the stability of the financial system and containing systemic risk that may arise in financial markets

• providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system

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