WASHINGTON (CN) – Federal Reserve Chair Ben Bernanke threw his weight behind efforts to regulate the financial markets in a statement Thursday before the House Financial Services Committee.
But there appeared to be a bipartisan consensus within the committee on limiting the Fed’s power, contrary to past statements from Treasury Secretary Timothy Geithner urging a drastic increase in the Fed’s power to regulate financial markets.
Texas Republican Ron Paul has even introduced a bill that would require the Government Accountability Office to audit the Fed.
Bernanke said the Fed is in a unique position to supervise the largest institutions, which have the weight to harm the larger financial system if they fail.
But in what many perceive as a concession to skeptics of the Fed’s power, Bernanke proposed that a panel of regulators monitor emerging risks in the market.
The proposal is one of five.
He also suggested that regulatory legislation be written so that important financial firms that do not fall under the Fed’s jurisdiction- specifically financial firms that are not a bank- can still be regulated.
And a process should be drawn up that would allow the government to wind down large failing institutions, he said.
Also, all important payment, clearing, and settlement arrangements should be subject to oversight.
The last of his proposals was perhaps the most general, that policymakers ensure consumers are protected from unfair practices.