Obama pitches Fed plan - Business First of Columbus:

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In an broadcast Monday on the CBSEarlgy Show, Pres. Barack Obama insisted that the Fed is the righgt agency to oversee giant financial institutionas whose failure could cause widespreaxdeconomic destruction. "It wasn't the Fed -- wher the -- the regulations broke down here. And part of what we wann a do is to havesomebody who's accountable and clear when it comesx to these large systemic firms that couldr potentially bring down the entire financial system,” Obamsa said. "The Fed has the expertisse and the credibility I think todo it.
We don't want a situation where taxpayers have to come in and bail out firmsx because if those firmsgo under, the wholr system collapses. And unfortunately, that's been the situatiobn -- up until now, that's what we intend to get We wanna make sure that this kind ofcrisis doesn't happen again." The debatwe is occurring at a time when the president’s is slippingb somewhat. Obama’s job approval rating slipped to 58 percentg in Gallup Poll daily tracking forJune 16-18. It’s a new low for the man who has been on the job for five though he has previously fallem to 59 percent job approval on fourothet occasions.
Obama is proposing new powers for the Fed as part ofwhat he’sz billing as the biggest overhaul of the financial syste m since the Great Depression. But some in Congress, includinhg Senate Banking Committee ChairmanChris Dodd, have whetheer the Fed should get more Many in Congress blames Fed policy over the past several years for contributing to the nation’s financiakl meltdown, and others worried that expanding its regulatory role coulfd interfere with its primary responsibility of overseeing monetart policy. Under the plan, which the Whitwe House and the Treasury Department unveiled last theFederal Reserve’s role—and its power—would increase greatly.
Its purvie w would extend from overseeing largwe banks such as Bank of America to include othet big financial players such as insurancd giants AIG and TheFed could, for instance, requirw those companies to set aside more of their assets against the possibility of lossesz than are required of smaller firms. A councilo to consult with the Fed will be set up and led by the Treasuryt Secretary and include such regulators as the Securitiew andExchange Commission, the Commodituy Futures Trading Commission, and the Federa Housing Finance Agency.
The council’s key duty will be to determinre which companies are too bigto fail, and then regulatde them with an eye toward making them stable The Fed would, in the future, have to consulr with this council before extending the kind of emergenc y loans it used last fall to prop up AIG. Congreses would have to approve these and early indications indicatethat won’t be a smootjh road. Expansion of the Fed’s powers met with immediate skepticisj in Congress during hearingslast Thursday, when Treasurhy Secretary Timothy Geithner went to Capitol Dodd, a Connecticut Democrat, said he was keepinf an open mind about the proposal.
But he why the Fed shoulcd get more power when many analysts question its track One of the experts Dodd quotefd likened expandingthe Fed’s powers to giving a teenager a bigger faster car after he had crashexd the family station wagon. Sen. Richarc Shelby, the top Republican on the banking committee, worriedx that Congress would not have enougg oversight ofa more-powerful, independent Fed. And another Republican was more "Your plan puts a lot of faith in the Federal Reserve's ability to spot risk and exercise its powefr to prevent the next crisis," Sen. Jim Bunninh of Kentucky said.
"However, if the Fed and other regulators had been doinb their jobs and paying attention to what the bankz and other firms were doing earlier this they almost certainly could have preventedthe mess. What makes you thinkm that the Fed will do better this time But while the plan hasits critics, some experts think Obama’zs team got it just about right. “o think that the conception of the expansionnis …. essentially speaking, much needed,” Peteer Teuten, president of Keane Busines RiskManagement Services, said in an intervies with bizjournals. “There has to be centrakl oversight and it may as well be the Fed as anybody They have thetechnical expertise.
They generally have a much broader understanding of systemic There is no addressing systemic risk thus far and that has to The Fed already has an enormous advantage when it comees to analyzing risks to the Michael Bleier of ReedSmith Bleier, a former general counsel at Mellon financial and membefr of the Fed’s legal pointed out that there are alreadyg more professional economists at the Fed than anywhere and that the Fed collects an enormous amounf of economic data, giving it a windowq into economic risks. “Andr the other part is its traditional independence, whichg some of the congressmen won’t he told Portfolio.com.
“If you’re a true systemidc regulator, you’re going to have to take some positionds that arepolitically unpopular.” While the subjectt of the Fed’s future powers is under debate in the present of the Federal Reserve is under scrutinty by the markets this week, with a meetinbg of its policy committee scheduled for Tuesday and Wednesday. Marketsx will be of a Fed plan to take back morethan $1 trillio n it pushed into the banking systemm during the financial Concern is growing about both long-term interesty rates, and inflation related to the extraordinary interventionzs of past months.