CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--10.txt It is a question of what risks are going to be protected by the Federal Government through the safety net , through deposit insurance , through the Federal Reserve , and other arrangements . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt When the financial markets crashed and the major surviving financial firms teetered on the brink the Federal Government had to determine whether these firms were adequately capitalized . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--13.txt Mr. Volcker , '' I appreciate your invitation to address important questions concerning the link between monetary policy and Federal Reserve responsibilities for the supervision and regulation of financial institutions . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--13.txt The Federal Reserve , after all , is the only agency that has financial resources at hand in amounts capable of emergency response . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--13.txt Before addressing the specific questions you have posed , I would like to make clear my long-held view , a view developed and sustained by years of experience in the Treasury , the Federal Reserve , and in private finance . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--13.txt For reasons that I discussed earlier , I do believe it would be a really grievous mistake to insulate the Federal Reserve from direct supervision of systemically important financial institutions . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--13.txt As implied by my earlier comments , the Federal Reserve , by the nature of its core responsibilities , is thrust into direct operational contact with financial institutions and markets . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--273.txt It would be a mistake to remove the Federal Reserve 's economic expertise from the country 's financial supervisory structure . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--273.txt For decades , the Federal Reserve has played a critical role in the banking regulatory system as a supervisor of State member banks and holding companies . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--273.txt The Federal Reserve Bank of Kansas City , the Federal supervisor of my bank , brings to its bank supervisory role a highly regarded expertise in the agricultural economy . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--273.txt The contributions and views of the Federal Reserve have been an important part of this regulatory diversity , which would significantly be diminished if the Federal Reserve were stripped of all or most of its supervisory authority . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--273.txt Federal Reserve Chairman Bernanke recently testified that the Federal Reserve 's supervision of community banks gives the Fed insight into what has happened at the grass roots level to lending and to the economy . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--273.txt ICBA is very concerned that limiting the Federal Reserve 's oversight to only the largest or systemically dangerous holding companies could lead to a bias and favor the largest financial institutions . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--273.txt This , in turn , gives the Federal Reserve an efficient means for gauging the soundness of the banking sector , information that is critical to developing and implementing sound monetary policy . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--113.txt Would reducing the number of institutions supervised by the Federal Reserve have an impact on the FOMC 's activities ? CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--245.txt Commercial banks enjoy a Federal Government safety net in the form of access to Federal deposit insurance , the Federal Reserve discount window , and Federal Reserve payment systems . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--10.txt The Federal Reserve has developed such expertise in its long experience supervising banks of all sizes , including community banks and regional banks . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--10.txt The Federal Reserve strongly supports ongoing efforts in the Congress to reform financial regulation and to close existing gaps in the regulatory framework . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--10.txt Mr. Bernanke , '' The Federal Reserve 's involvement in regulation and supervision confers two broad sets of benefits to the country . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--10.txt The Federal Reserve making of monetary policy and its management of the discount window also benefit from its supervisory experience . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--10.txt In the course of carrying out its central banking duties , the Federal Reserve has developed extensive knowledge and experience in each of these areas critical for effective consolidated supervision . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt Proponents of preserving robust Fed supervision authority cite three main points to support their position that the Fed should retain broad supervisory powers . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt It is worth examining whether the Federal Reserve should conduct monetary policy at the same time it regulates and supervises banks or whether it should concentrate exclusively on its microeconomic responsibilities . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt Proponents of retaining Fed supervision say this expertise would be costly and difficult if not impossible to replicate in other agencies . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--119.txt Mr. Bernanke , could you comment on the Federal Reserve 's supervisory powers over your member institutions on various financial activities in which they operate ? CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--246.txt But in an illustration of the broadly corporativist evolution of Fed policy , as manifested in the government bond market , Corrigan sought broader powers to support the dealer community . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--78.txt Mr. Scott , '' I think addressing Long-Term Capital Management , the first issue is protecting the institution from failing , capital . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--137.txt In the notable $ 85 billion Federal bailout of AIG , however , some question whether the asserted prospect of severe counterparty losses actually existed . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--43.txt The Federal Reserve has made large investments in quantitative and qualitative analysis of the U.S. economy , financial markets , and financial institutions . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--43.txt While considerable steps have been made in the wake of the financial crisis , the Federal Reserve intends to do a good deal more . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--43.txt The ability of regulators to collect information should similarly be expanded to include the ability to gather market data necessary for monitoring systemic risks . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--43.txt Protecting privacy and private-sector property rights clearly are important policy objectives ; they are important considerations in the Federal Reserve 's current data collection and safeguarding . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--271.txt In addition , in order for the Federal Reserve to look across financial institutions and the interaction between them and the markets for emerging risks , as it currently does , it is vital that the Fed have an accurate picture of circumstances within banks . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--200.txt It does n't pose the same kind of systemic risk that the big institutions do , but there is value to the Federal Reserve , and maybe some value in having more than one agency concern there . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--13.txt Commercial banks enjoy a Federal Government safety net in the form of access to Federal deposit insurance , the Federal Reserve discount window , and Federal Reserve payment systems .