Fed to See Increased Regulatory Power
Wall Street doesn’t seem to be exactly hating the new proposal for regulatory reform being set forth by President Barack Obama. After all, this is the first time in three days that the Dow hasn’t gone negative by midday. It’s not up by a whole lot, but it’s in the black. At any rate, the President is announcing plans to seek a near-complete overhaul of the financial regulatory system. And one of the things that will be a part of this new structure is increased powers for the Federal Reserve. The Street reports on the new responsibilities of the Fed:
Under Obama’s plan, the Fed would gain power to supervise holding companies and large financial institutions considered so big that their failure could undermine the nation’s financial system. But even as it gains new powers, the Fed also would lose some banking authority to a new Consumer Financial Protection Agency.
Perhaps this is why Wall Street isn’t up in arms. After all, the point of the Fed will be, in part, to make sure that large financial institutions remain solvent. The idea is to prevent things from progressing to the point where the only two options are bailout or fail; neither of these options is much thought of by any political leaders. Whether or not the Fed will be up to the challenge is another question.
As expected, there are concerns about the Fed’s expanded scope. Will it eventually mean too much influence for the Fed? That is the biggest fear. However, some of that increase in power is being tempered by a reduction in the ability of the Fed to regulate consumer financial products and services. (This move is causing concern on Wall Street.) Additionally, the Fed will have to get permission before bailing out institutions on the verge of failure.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
June 17th, 2009 at 11:59 am
[…] a Comment // One of the biggest changes to financial system regulation presented in President Barack Obama’s regulatory reform proposal calls for the creation of an […]
June 17th, 2009 at 12:17 pm
[…] our financial products and services industry. In addition to expanding the scope of some of the Federal Reserve’s powers to regulate large firms, Obama suggests that a consumer protection agency be created. One of the […]