FACTBOX-What financial overhaul means for the Fed

May 21 (BestGrowthStock) – Sweeping U.S. financial regulatory
reforms moving through Congress took a step closer to becoming
law when the Senate passed a bill on Thursday.

The Senate bill must be melded with a measure that cleared
the House of Representatives in December.

Following is a look at provisions in both bills that affect
the Federal Reserve:

CONSUMER PROTECTION

The Senate bill sets up a consumer protection bureau within
the Fed and funded by the Fed. The new agency would have power
to write consumer protection rules, but the Fed would have a
role overseeing the agency. The House bill proposes a new,
fully independent U.S. Consumer Financial Protection Agency to
regulate mortgages, credit cards and other products.

SYSTEMIC RISK REGULATION

The Senate measure sets up an inter-agency Financial
Stability Oversight Council chaired by the Treasury Secretary
to watch for dangers that could roil the wider financial
system, giving the Fed some powers to take action.

The House creates a similar council, but gives the Fed a
much larger role in executing policy by setting limits for
large, interconnected firms that could threaten economic
stability.

The Senate bill formally gives the Fed responsibility for
monitoring and defusing risks to U.S. financial stability. The
House bill allows the Fed to limit credit exposures at
financial firms, block acquisitions, restrict pay and shut down
undercapitalized firms.

SYSTEMICALLY IMPORTANT FIRMS

The Senate bill puts the Fed in charge of supervising all
financial firms with assets greater than $50 billion that could
rock the financial system if they collapsed. The House bill
lets a systemic risk council impose stricter standards for
systemically important financial firms.

AUDITS

The House bill allows reviews of Fed monetary policy
decisions by the Government Accountability Office, a
congressional investigative agency. The Senate bill calls for a
one-time audit of the Fed’s emergency lending during the
2007-2009 crisis, but does not touch monetary policy. The Fed
successfully fought off a Senate provision that would have
exposed it to repeated audits of its emergency lending.

GOVERNANCE

The Senate bill makes the president of the New York Federal
Reserve Bank a presidential appointee subject to Senate
confirmation, instead of a pick of the New York Fed’s board of
directors, as is currently the case.

It also establishes a Fed Vice Chairman for supervision.

Further, it puts the Fed’s Washington-based Board of
Governors in charge of appointing all of the directors of the
12 regional Fed banks around the country, and stipulates that
bankers supervised by the Fed can’t serve on these boards.

Currently, regional Fed boards are composed of a
combination of bankers, people picked by bankers, and people
chosen by the Fed Board in Washington.

The House bill makes no similar changes.

EMERGENCY POWERS

The Senate bill eliminates the Fed’s ability to lend to
firms that do not already have access to its emergency lending
facilities. During the financial crisis, the Fed provided funds
to some non-bank Wall Street firms, citing a rarely used
emergency provision of law. Usually, it lends only to banks.

The House bill puts a specific $4 trillion cap on Fed
emergency lending and imposes controls by other agencies.

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(Reporting by Mark Felsenthal; Editing by Andrew Hay)

FACTBOX-What financial overhaul means for the Fed