Disagreement Over Plan Giving Fed More Oversight

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The Obama administration has proposed giving the Federal Reserve Board more authority for overseeing companies too big to fail. A group of investors said Wednesday that an independent board, and not the Federal Reserve, should be looking out for systemic risks to the financial system.

STEVE INSKEEP, host:

The Obama administration has tried to overhaul the way the financial firms are regulated. And one thing the administration would like to do is give the Federal Reserve Board more authority to oversee companies considered too big to fail. Not everybody thinks that's a good idea.

NPR's Wendy Kaufman reports.

WENDY KAUFMAN: A group of large investors said yesterday that an independent board, not the Federal Reserve, should be looking out for systemic risks to the financial system. What makes the recommendation noteworthy is that the group was led by two former chairmen of the Securities and Exchange Commission. Former SEC Chairman William Donaldson says the group wanted to make sure that investor concerns were being addressed, as Congress debates new legislation. He wanted big companies to be overseen by a new government agency, one that is independent, has a strong leader, and a smart staff.

Mr. WILLIAM DONALDSON (Former SEC Chairman): They would have a mandate to go anywhere they wanted to, to try and anticipate problems, and then take their conclusions to the proper regulatory agency.

KAUFMAN: The process, he says, would be transparent. In contrast, the panel said giving more authority to the Federal Reserve was a bad idea. The central bank's credibility had been tarnished, it said, by easy credit policies and a lax regulatory approach. It added that new oversight responsibilities proposed by the White House could be in conflict with the Fed's primary role of setting monetary policy.

Wendy Kaufman, NPR News.

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