Tulsa World: White House wants Fed to be bank supercop

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White House wants Fed to be bank supercop
The organization would monitor systemwide risk.

FDIC Chair Sheila Bair, left, and Gary Stern, president, Federal Reserve Bank of Minneapolis, listen on Capitol Hill in Washington, Wednesday, May 6, 2009, during a Senate Banking Committee hearing on resolving issues with institutions deemed "too big to fail". (AP Photo/Alex Brandon)

By ANNE FLAHERTY Associated Press
Published: 5/9/2009 2:25 AM
Last Modified: 5/9/2009 6:10 AM

WASHINGTON — The White House told industry officials on Friday that it is leaning toward recommending that the Federal Reserve become the supercop for "too big to fail" companies capable of causing another financial meltdown.

According to officials who attended a private one-hour meeting between President Barack Obama's economic advisers and representatives from about a dozen banks, hedge funds and other financial groups, the administration made it clear it was not inclined to divide the job among various regulators as has been suggested by industry and some federal regulators.

"The idea of having a council of regulators was pretty much vetoed," said one participant.

Treasury Secretary Timothy Geithner, who briefly attended the meeting but did not identify the Fed specifically as his top choice, told the group that one organization needs to be held responsible for monitoring systemwide risk. He said such a regulator should be given better visibility into all institutions that pose a risk to the financial system, regardless of what business they are in.

"Committees don't make decisions," Geithner told the group, according to another participant.

Officials from the Treasury Department and the National Economic Council, which hosted the meeting, told participants that the Fed was considered the most likely candidate for the job, according to several officials who attended or were briefed on the discussions.

The administration officials said a legislative proposal would

likely be sent to Capitol Hill in June with the expectation that the House Financial Services Committee, led by Rep. Barney Frank, D-Mass., would consider the measure before the July 4th recess.

The officials requested anonymity because the meeting had not been publicly announced and they were not authorized to discuss it.

A Treasury Department statement provided to the Associated Press on Friday confirmed Geithner's position that he wants a "single independent regulator with responsibility for systemically important firms and critical payment and settlement systems."

A spokesman said Geithner also is open to creating a council to "coordinate among the various regulators, including the systemic risk regulator."

Industry officials say such a council would likely serve as advisers.

The Fed itself hasn't taken a position on whether it should have the job, although Chairman Ben Bernanke has said the Fed would have to be involved in any effort to identify and resolve systemwide risk.

Geithner said Friday the administration plans an "aggressive" package of reforms for the financial system including proposals to fundamentally overhaul how financial institutions pay their senior executives. Critics have charged that the bonus system used at many major institutions encouraged excessive risk taking.

"We had a financial system that did a terrible job of protecting consumers, of building a strong, stable financial system less prone to crisis, and we are going to have to fix that," Geithner said on PBS' "Newshour." "You will see this president, this administration bringing sweeping reforms to our financial system."

In a speech Thursday, Bernanke said that huge, globally interconnected financial firms whose failure could endanger the U.S. economy should be subject to "a robust framework for consolidated supervision."

Naming the Fed as a kind of super regulator is likely to run into at least some resistance in Congress.

Lawmakers are divided on whether the Fed alone should assume the role. Some say the Fed failed to prevent the current crisis and shouldn't be trusted with such a big responsibility. Others say the Fed should focus on its primary duty of setting monetary policy.

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	Report Comment Just a country boy, North Okmulgee County (5/9/2009 7:26:16 AM) Welcome to the USSR!
	Report Comment jess, (5/9/2009 7:35:39 AM) Get the Federal Government OUT of private business! Obama only solution to anything is bigger government and more taxes. How a business is run is up to the management and stockholders. The poorly run will fail and the well run will succeed. The Federal government cant't run any business. Take a look at your Post Office which is just one example. Politicians are generally just individuals with no business experience whatsoever. How can they oversee a business?
	Report Comment Eagle 4, Tulsa (5/9/2009 7:55:19 AM) ..."Others say the Fed should focus on its primary duty of setting monetary policy." Gee, setting monetary policy without control of the banking policies!... Anyone care for a ride in my jet today? Oh, that! I'm getting the steering controls installed later...
	Report Comment Bubba, Bixby (5/9/2009 8:28:58 AM) Jesus H Christ! How can any American continue to support this guy? Bush made some mistakes but he never steered us down the path to communism! How long before he starts determining the career paths of our children?
	Report Comment Scritchner, Tulsa (5/9/2009 9:02:28 AM) Oh, no! Another Red Scare!!! I better take the kids to the storm cellar!
	Report Comment DonInTulsa, (5/9/2009 9:07:47 AM) If there had been some common sense regulation of the banking industry, we could have avoided much of this financial meltdown. I agree that for most corporations, survival of the fittest should be the rule. But when the failure of these mega banks could drag down the entire financial system, there needs to be some oversight.
	Report Comment Angry Citizen!, Bluejacket (5/9/2009 11:14:25 AM) Here we go again, let's put congress in charge of the banks (freddie/fannie) and see how that works out...
	Report Comment DonInTulsa, (5/9/2009 11:27:50 AM) As an aside, I don't understand why people point to the post office as a government run failure. It certainly has layers of bureaucracy, but any large business has that. I think the post office does a good job, considering the amount of mail they handle. And no, I'm not a postal worker.
	Report Comment Bluebell, Tulsa (5/9/2009 11:54:05 AM) I agree with Bubba and Righton. Send that jerk packin' How about puttin' him on a slow boat to KENYA.
	Report Comment Just a country boy, North Okmulgee County (5/9/2009 2:40:22 PM) DoninTulsa The post office is going broke. Is that considered a good job?
	Report Comment missy..........m., countryside (5/9/2009 7:43:25 PM) Hope there is fiber in that fed stuff cause there is nothing like getting all fed up and then getting regulated.
	Report Comment DonInTulsa, (5/9/2009 8:04:22 PM) country boy, I guess we could use carrier pigeons to deliver the mail. They have problems, but the mail gets there as a rule. They've done a hell of a lot better job at managing than some of these banks.
	Report Comment missy..........m., countryside (5/10/2009 2:18:20 AM) You know...its getting hard to sleep with just that one eye open at night but I finally peeked up enough to where I changed and switched eye balls.Im gonna just say this since Im always in my own world anyway and trouble seems to find me anyway,I think the feds are a good presence to have around.I think they can be helpful in many ways.I laso feel like they stick their nose in everything,sometimes where they shouldnt....oh yeah the forever stamp went up in the price along with the mail box rent at the post office so how broke could it possibly be?As for these banks,if they cannot do any better than I suppose they should have someone who can oversee what they are doing,personally better mangement and better employees that have that community feel to them might also help...I know my mother has been banking with a federal credit union and her statements each month are very difficult to read and figure out.
	Report Comment kridkrid, (5/11/2009 9:43:02 AM) Ugh... you people are fools for calling this Communism. This is fascism and it did not start with the election in November. Wake up people... both parties have made this possible... Making this a D vs. R thing just muddies the waters.

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