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 The only regulatory authority it would have would be to provide reference data , set data reporting standards , and compel the provision of data . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt The Research Center will be responsible for conducting , coordinating and sponsoring the long-term research needed to support systemic risk regulation . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt Although it will take time and substantial effort to stand up the National Institute of Finance , the benefits should far outweigh the cost . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt The primary objective of the CE-NIF is to seek the passage of legislation to create a National Institute of Finance -LRB- NIF -RRB- . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--138.txt Asset management firms -LRB- including hedge funds and private investment firms -RRB- play a very important role in today 's capital markets , helping to allocate capital between providers and users . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--15.txt And that is why in our proposal for the National Institute of Finance we would have two key components : One , the Federal Financial Data Center ; and the second , a Federal Financial Research and Analysis Center . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--15.txt We have come together to propose a solution to that inadequacy in the Federal Government 's capability and that solution is the National Institute of Finance . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--4.txt And that raises the issue of a focal point on large institutions might miss small institutions that could cause systemic risk . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--103.txt And that will , I think , be an awfully important thing going forward to make sure that we do maintain the strong competitive position of the U.S. financial services industry . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--245.txt An updated size limit for financial firms will have a beneficial effect on the overall health of the financial system . 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-111shrg57709/CHRG-111shrg57709--245.txt Limiting the relative size of any single financial firm will reduce the adverse effects from the failure of any single firm . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--239.txt PREPARED STATEMENT OF SENATOR SHERROD BROWN Thank you , Mr. Chairman , for holding this hearing on the Administration 's plan to curb risky investment activities by banks . 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 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 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 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--10.txt In summary , the Federal Reserve 's wide range of expertise makes it uniquely suited to supervise large complex financial institutions and to help identify risks to the financial system as a whole . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--134.txt 7 -RRB- The fact that `` end-users '' of derivatives share in the implicit Government subsidy should not encourage the continuation of `` too big to fail '' arrangements . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--134.txt In addition , capital requirements need to be strengthened dramatically , back to the 20-25 percent level that was common before 1913 , i.e. , before the creation of the Federal Reserve , when the Government effectively had no ability to bail out major banks . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--134.txt In a very real sense , the U.S. Government is now backing the world 's largest speculative investment funds -- without any effective oversight mechanisms . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--271.txt On the 11th of December , your committee passed a reform bill that would preserve the Federal Reserve 's role as a supervisor of financial institutions . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--137.txt But because banks are highly regulated entities , regulators are in a good position to respond to bank failures . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--137.txt Defining proprietary trading too broadly , meanwhile , might seriously impair the basic function of modern banks as market-makers in Government and nongovernment securities , and as securitizers of consumer debt . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--137.txt -- The losses at the center of the financial crisis mainly resulted from the credit , lending , and securitization functions of U.S. banks . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--137.txt This will also require that Federal regulators be given enhanced resolution authority , as set forth in H.R. 4173 and Senator Dodd 's Discussion Draft . 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-111shrg61651/CHRG-111shrg61651--137.txt As outlined above , most U.S. banks , with the exception of Goldman Sachs , report minimal proprietary trading activity so defined . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--43.txt Credit risks were amplified by leverage and the high degree of maturity transformation , especially outside of traditional commercial banking institutions . 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 This approach might achieve the benefits of the current arrangement and the proposed independent agency , while avoiding their drawbacks . 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-111shrg61651/CHRG-111shrg61651--132.txt As I see it , client-driven market making and the hedging and risk management activities growing out of such market making are natural activities of banks and Bank Holding Companies . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--132.txt A less extreme , but still transformational structural change has been suggested by Chairman Volcker and endorsed by President Obama . 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 . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--13.txt The second of the President 's recent proposals is to place a cap on the relative size of the largest financial firms .