CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--138.txt It was not AIG 's and Bear Stearns ' size but their interconnection to other firms that prompted the Government to step in . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--138.txt My name is Barry Zubrow , and I am the Chief Risk Officer and Executive Vice President of JPMorgan Chase and Co. . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--138.txt For the most part , banks ' liabilities and capital support the asset growth of its loan and lending activities . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--138.txt Bear Stearns , Lehman , and Merrill Lynch were all damaged by their excessive exposure to real estate credit risk . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--138.txt We will return to the same regime in which Bear Stearns and Lehman Brothers both failed and other systemically important institutions nearly brought the system to its knees . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt Last year , the House passed our financial services reform legislation that substantially preserved the Fed 's power to supervise these financial institutions . 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 Under Senator Dodd 's proposal , the Fed would supervise 40 or 50 large banks , and the other 7,500 or so banks would be under the regulatory purview of other Federal and State banking agencies . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt Interest rates fixed by the Federal Reserve is price fixing , and it should have no part of a free market economy . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt The Senate bill recently introduced by Senator Dodd , however , would strip the Fed 's authority to supervise all but approximately the 40 largest financial institutions . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt There are inherent conflicts of interest where the Fed might be tempted to conduct monetary policy in such a way that hides its mistakes by protecting the struggling banks it supervises . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt Despite this intense on-site presence , the New York Fed and the SEC stood idle while the bank engaged in the balance sheet manipulations detailed in the report . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt By contrast , the regulatory reform legislation passed by the House in December represented a large expansion of the Fed 's regulatory role since its creation almost 100 years ago . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt This hearing was called to examine the potential policy implications of stripping regulatory and supervisory powers over most banks from the Fed , especially the potential impact this could have on the Fed 's ability to conduct monetary policy effectively . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt If this were to happen , the Fed 's focus on the mega banks will inevitably disadvantage the regional and community banks , and I think on this , Chairman Bernanke , you and I are in agreement , that there ought to be one regulator looking at all the institutions . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt Third , proponents say that the Fed 's supervisory activities provide the Fed information about the current state of the economy and the financial system that influences the FOMC in its execution of monetary policy , including interest rate setting . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt Vince Reinhart , a former Director of the Fed 's Division of Monetary Affairs and now a resident scholar at the American Enterprise Institution , said that collecting diverse responsibilities in one institution is like asking a plumber to check the wiring in your basement . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt Let me see if I can try to use some of the chairman 's time and my time to kind of frame this hearing in a way that we will kind of get a balanced view of what folks are saying . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--3.txt According to the New York Times , all this happened while a team of officials from the Securities and Exchange Commission and the Federal Reserve Bank of New York were resident examiners in the headquarters of Lehman Brothers . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56241/CHRG-111hhrg56241--183.txt We will have an all-day hearing on Friday , February 5th , with borrowers and regulators and lenders , and we want to get into this question about why more loans are n't being made . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--218.txt When the mortgage-backed security -- when Fannie Mae packages the mortgage-backed securities , the Fed is a principal holder of mortgage-backed securities . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--218.txt Chairman Bernanke , I would like to ask you about the inter-connectedness of Fannie Mae , which is owned -- the largest shareholder is the United States Government in conservatorship . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--136.txt I am not going to get deeply into the consumer financial protection agency that has been talked about so much , and what 's happening with the Dodd bill . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--136.txt And that 's one of the reasons I am so interested in the Consumer Financial Protection Agency , because I think they can start to see these things in different ways than they have been seen in the past . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--271.txt As former Fed Chairman Paul Volcker observed earlier this afternoon , monetary policy and concerns about the structure and condition of banks and the financial system , more generally , are inextricably intertwined . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--271.txt On Monday of this week , Chairman Dodd of the Senate Banking Committee released a draft bill that would assign supervision of bank and thrift holding companies with assets of greater than $ 50 billion to the Fed . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--271.txt While we think that it is sensible that the Fed retains meaningful supervisory authority in that bill , we also believe the Fed and the U.S. financial system would benefit from the Fed also having a supervisory dialogue with small and medium-sized institutions , a point which is well articulated by Jeff Gerhart in his testimony . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--271.txt We thank you , Mr. Chairman , Ranking Member Paul , and all the members of this committee for all of your tireless work over the past 15 months . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--271.txt If that critical gearing is broken or defective , monetary policy changes by the Fed will have little , or even none , of the intended impact on the broader economy . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--271.txt As Anil Kashyap noted , U.S. policymakers should also be mindful of international trends in the wake of financial crisis . 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 .