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 .
The only regulatory authority it would have would be to provide reference data , set data reporting standards , and compel the provision of data .
The Research Center will be responsible for conducting , coordinating and sponsoring the long-term research needed to support systemic risk regulation .
Although it will take time and substantial effort to stand up the National Institute of Finance , the benefits should far outweigh the cost .
The primary objective of the CE-NIF is to seek the passage of legislation to create a National Institute of Finance -LRB- NIF -RRB- .
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 .
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 .
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 .
And that raises the issue of a focal point on large institutions might miss small institutions that could cause systemic risk .
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 .
An updated size limit for financial firms will have a beneficial effect on the overall health of the financial system .
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 .
Limiting the relative size of any single financial firm will reduce the adverse effects from the failure of any single firm .
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 .
The Federal Reserve has developed such expertise in its long experience supervising banks of all sizes , including community banks and regional banks .
Mr. Bernanke , '' The Federal Reserve 's involvement in regulation and supervision confers two broad sets of benefits to the country .
The Federal Reserve strongly supports ongoing efforts in the Congress to reform financial regulation and to close existing gaps in the regulatory framework .
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 .
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 .
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 .
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 .
In a very real sense , the U.S. Government is now backing the world 's largest speculative investment funds -- without any effective oversight mechanisms .
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 .
But because banks are highly regulated entities , regulators are in a good position to respond to bank failures .
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 .
-- The losses at the center of the financial crisis mainly resulted from the credit , lending , and securitization functions of U.S. banks .
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 .
In the notable $ 85 billion Federal bailout of AIG , however , some question whether the asserted prospect of severe counterparty losses actually existed .
As outlined above , most U.S. banks , with the exception of Goldman Sachs , report minimal proprietary trading activity so defined .
Credit risks were amplified by leverage and the high degree of maturity transformation , especially outside of traditional commercial banking institutions .
The Federal Reserve has made large investments in quantitative and qualitative analysis of the U.S. economy , financial markets , and financial institutions .
This approach might achieve the benefits of the current arrangement and the proposed independent agency , while avoiding their drawbacks .
While considerable steps have been made in the wake of the financial crisis , the Federal Reserve intends to do a good deal more .
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 .
A less extreme , but still transformational structural change has been suggested by Chairman Volcker and endorsed by President Obama .
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 second of the President 's recent proposals is to place a cap on the relative size of the largest financial firms .