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 .
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 .
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 .
The Federal Reserve , after all , is the only agency that has financial resources at hand in amounts capable of emergency response .
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 .
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 .
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 .
It would be a mistake to remove the Federal Reserve 's economic expertise from the country 's financial supervisory structure .
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 .
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 .
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 .
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 .
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 .
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 .
Would reducing the number of institutions supervised by the Federal Reserve have an impact on the FOMC 's activities ?
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 .
The Federal Reserve has developed such expertise in its long experience supervising banks of all sizes , including community banks and regional banks .
The Federal Reserve strongly supports ongoing efforts in the Congress to reform financial regulation and to close existing gaps in the regulatory framework .
Mr. Bernanke , '' The Federal Reserve 's involvement in regulation and supervision confers two broad sets of benefits to the country .
The Federal Reserve making of monetary policy and its management of the discount window also benefit from its supervisory experience .
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 .
Proponents of preserving robust Fed supervision authority cite three main points to support their position that the Fed should retain broad supervisory powers .
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 .
Proponents of retaining Fed supervision say this expertise would be costly and difficult if not impossible to replicate in other agencies .
Mr. Bernanke , could you comment on the Federal Reserve 's supervisory powers over your member institutions on various financial activities in which they operate ?
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 .
Mr. Scott , '' I think addressing Long-Term Capital Management , the first issue is protecting the institution from failing , capital .
In the notable $ 85 billion Federal bailout of AIG , however , some question whether the asserted prospect of severe counterparty losses actually existed .
The Federal Reserve has made large investments in quantitative and qualitative analysis of the U.S. economy , financial markets , and financial institutions .
While considerable steps have been made in the wake of the financial crisis , the Federal Reserve intends to do a good deal more .
The ability of regulators to collect information should similarly be expanded to include the ability to gather market data necessary for monitoring systemic risks .
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 .
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 .
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 .
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 .