Fed May Get New Oversight Authority
LIANE HANSEN, host:
From NPR News, this is WEEKEND EDITION. I'm Liane Hansen.
Tomorrow, the Bush administration will announce plans to revamp the way the government oversees the financial industry. Also this week, Ben Bernanke, the head of the Federal Reserve, is set to meet with House Republican leaders to discuss the U.S. economy as members of Congress return from a two-week break.
We have several reports this morning on the state of the economy. The first is from NPR's Frank Langfitt on the proposal the Treasury Department will unveil tomorrow.
FRANK LANGFITT: As the nation stumbles through its worst financial crisis in decades, the administration is pushing for some big changes to bring it under control. One is to give the Federal Reserve investigative powers. Under the plan, the Fed would be able to dig into the books of firms that threaten the overall stability of the financial system, like the investment bank, Bear Stearns, which collapsed earlier this month. This would be a new and very different role for the Fed. Until now, its job has been to set interest rates and serve as the lender of last resort.
Another proposal: consolidate the hodgepodge of agencies that oversees an increasingly complex financial world. In his plan, Treasury Secretary Henry Paulson noted, quote, "No single regulator possesses all the information and authority necessary to monitory systemic risk." In other words, no one government entity can keep watch over the entire field of play.
Today's oversight system is widely viewed as outdated. Here's Democratic Senator Charles Schumer of New York. He spoke by cell phone as he was getting on a plane:
Senator CHARLES SCHUMER (Democrat, New York): Our financial system has evolved dramatically, globalization, new kinds of instruments, new kinds of structures and yet, the regulatory system has sort of stayed back in the 1930s and 1940s.
LANGFITT: The Treasury Department's plan also calls for a new commission to monitor the mortgage lending business, where the financial contagion started. But Schumer says the government has to provide more regulation to make sure it doesn't happen again.
Sen. SCHUMER: It's amazing to me and confounding that the administration still refuses to regulate the Countrywides and the independent mortgage brokers who are right at the cause of this.
LANGFITT: Much of the plan will require approval by Congress. Given the election season and the financial stakes involved, it's not expected to be resolved any time soon.
Frank Langfitt, NPR News, Washington.