Fed’s Bullard: Fed best placed to prevent future crises

NEW YORK, April 15 (BestGrowthStock) – The U.S. Federal Reserve’s
political independence may make it better suited than a council
of regulators to spot and act upon behavior that could threaten
the entire financial system, a senior Federal Reserve official
said on Thursday.

“It seems like it would be difficult for an interagency
council to come to agreement on specific risk and an associated
action when times are good,” St. Louis Federal Reserve Bank
President James Bullard said, according to slides prepared for
a Levy Economics Institute conference in New York.

“This type of decision may be better suited to the Fed,” he
said. He said it was unclear a systemic risk council would be
able to prevent a future crisis.

Lawmakers want a new entity that can spot and head off the
next crisis. The Senate bill would set up a 9-member council of
regulators, chaired by the Treasury Secretary. The House of
Representatives bill proposes an inter-agency council chaired
by the Treasury as well, but gives the Fed a bigger role as
chief policy agent.

In his presentation, Bullard argued for a broader
regulatory role for the U.S. central bank.

“A Fed with an appropriately broad regulatory
responsibility provides the U.S. with the best chance to head
off a future crisis,” he said. Many of the problems that led to
the current crisis occurred outside the Fed’s purview,
complicating the Fed’s role as lender of last resort, he
added.

“Due to its narrow regulatory authority, the Fed had a
severely limited view of the financial landscape as the crisis
began.”

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(Reporting by Kristina Cooke and Emily Flitter, Editing by
Chizu Nomiyama)

Fed’s Bullard: Fed best placed to prevent future crises