Having the Federal Reserve become the systemic risk regulator for all large financial institutions concentrates enormous power in one agency .
While this area deserves further consideration , we urge Congress to approach this issue carefully in order to maintain appropriate transparency and loss recognition in the financial services industry .
Representative Wright Patman , populist chairman of the House Banking Committee , sought to prevent increased concentration in banking and the broader economy .
--------------------------------------------------------------------------- Based on the results of these and other efforts , the Federal Reserve is taking steps to improve regulatory requirements and risk management at regulated institutions .
Federal Reserve Programs The Federal Reserve has implemented a number of programs designed to stabilize financial markets since the onset of the crisis .
In fact , a Letter to Credit Unions that promotes best practices of member business lending is currently in process .
A change in federal regulatory culture is essential Consumer advocates have long noted that federal banking agencies give insufficient attention to achieving effective consumer protection .
--------------------------------------------------------------------------- State regulators play an important role in protecting the safety and soundness of the state credit union system .
This is an issue that Congress should address in any legislation authorizing a SRR or enhancing the powers of the Federal Reserve .
Again , as the Administration 's own proposal States , 94 percent of the high cost mortgages occurred outside the regulated banking sector .
While the Fed and the OCC became increasingly enamored of Basel II over the past 10 years , the FDIC suffered repeated criticism for their stick-in-the-mud insistence on the leverage ratio .
Within the system , the Board and the Reserve Banks share responsibility for supervising and regulating certain banks and financial institutions .
The policy question facing Congress is whether it makes sense to extend FDIC bank resolution processes to other financial institutions .
With a few additions to their existing holding company authority , the Federal Reserve would seem well positioned for this important role .
Independent NCUA regulation has enabled credit unions to perform in a safe and sound manner while fulfilling the cooperative mandate set forth by Congress .
We propose to enhance the Federal Reserve 's authority over market infrastructure to reduce the potential for contagion among financial firms and markets .
By design , the board and the reserve banks are not directly accountable to Congress and are not easily subject to congressional oversight .
If consumers lack confidence in their institution or are unable to maintain their economic responsibilities , the institution will undoubtedly suffer .
The Federal Reserve Board -- Many people believe the Federal Reserve Board -LRB- the `` Fed '' -RRB- is the most logical body to serve as systemic risk overseer .
The SLC includes representatives from the Conference of State Bank Supervisors , the American Council of State Savings Supervisors , and the National Association of State Credit Union Supervisors .
The Chairman noted that the SEC is working towards improving its risk-based oversight , including extending that oversight to investment advisers .
We have proposed that the Federal Reserve act as the consolidated supervisor of the largest and most interconnected financial firms .
Treasury worked closely with the SEC and CFTC to propose a comprehensive framework for regulation of derivatives that is consistent across both SEC and CFTC jurisdiction .
The Council is required to report to Congress each year on these risks and threats and to coordinate action by individual regulators to address them .
The reason we have money market funds was that Fed regulation Q restricted the interest that the public could earn .
Under the Bank Holding Company Act , the Federal Reserve Board has statutory authority to impose and enforce supervisory requirements on those entities .
The Federal Reserve has developed written guidelines for Reserve Bank staff to follow and a Redemption Request Decision Memo for Reserve Banks to complete when processing and analyzing redemption requests .
Capital and Reserve Levels Perhaps the most critical tools for dealing with and absorbing credit losses are substantial levels of capital and reserves .
To mitigate these risks , the Treasury provided equity capital to AIG and the Federal Reserve provided liquidity support backed by the assets of AIG .
With respect to time expended by the Reserve Bank members of the Federal Open Market Committee , the President of the New York Reserve Bank devotes significant attention to AIG .
Mr. Carnell , '' Mr. Chairman and Members of the Committee , our current bank regulatory structure is and remains a source of serious problems .
The result was a failure to deal effectively with troubled thrifts , much larger losses to the Deposit Insurance Fund .
These standards must apply across all jurisdictions and issuers , otherwise gaps create competitive pressures to reduce standards , as we saw with mortgage lending standards .
From the outset of the credit crisis , the Federal Home Loan Banks have engaged to ensure liquidity to the financial system .
The Treasury Proposal would make these types of firms subject to the Bank Holding Company Act and supervision by the Federal Reserve Board .
So under the legislation , the traditional preemption by national banks would not be available and States could set higher rules for products and services .
To date , the Federal Government has committed to provide approximately $ 170 billion in loans and equity to AIG .
My testimony today will seek to answer the second question at three levels : 1 How should Congress strengthen the regulatory architecture to better protect investors ; 2 .
We 're also pleased to see that the Federal Reserve would be given a strong role in the regulation of systemically important financial companies .
There is scant information that suggests the Federal Reserve or FDIC 's on-site activities , were instrumental in stemming the current crises or bank failures .
This would leave 8 financial regulators at the Federal level and 50 bank regulators , 50 insurance regulators and 50 securities regulators at the State level .