Wednesday, March 24, 2010

Fed's regulatory powers likely to be expanded

One thing now seems certain to come out of Congress' plodding financial reform effort: The Federal Reserve, after being castigated for much of the past year for overlooking major problems that led to the global financial crisis, will receive more power to try to prevent such crises in the future. Both the House-passed reform bill and a measure being pushed by Senate banking committee Chairman Christopher J. Dodd would put the Fed in the driver's seat — with varying degrees of advice and consultation with other regulators — for supervising the largest banks and financial firms such as American International Group Inc., whose risky practices led to the near collapse of the financial system. The Fed also would be charged with breaking up big firms as necessary to prevent crises, or moving to close them if they become insolvent. The Fed's upgraded status comes as a surprise to many observers, after legislators from both parties berated the central bank and threatened its chairman, Ben S. Bernanke, with congressional investigations and even an more

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