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 NIF would have two key organizational components : the Federal Financial Data Center -LRB- Data Center -RRB- and the Federal Financial Research and Analysis Center -LRB- Research Center -RRB- . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt To stave off the consequences of a failure to those already fragile firms doing business with AIG , the Federal Government committed to put almost $ 200 billion in capital into AIG . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--241.txt Given strong legislative direction , bank supervisors should be able to appraise the nature of those trading activities and contain excesses . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--241.txt PREPARED STATEMENT OF PAUL A. VOLCKER Chairman , President 's Economic Recovery Advisory Board February 2 , 2010 Mr. Chairman , Members of the Banking Committee : You have an important responsibility in considering and acting upon a range of issues relevant to needed reform of the financial system . 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-111shrg61651/CHRG-111shrg61651--138.txt Effective examination allows regulators to understand the risks institutions are taking and how those risks are likely to change under different economic scenarios . 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 The Federal Reserve currently has extensive authority to regulate and supervise bank holding companies and State banks that are members of the Federal Reserve System , and foreign branches of member banks , among others . 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--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-111shrg57923/CHRG-111shrg57923--41.txt To that end , the National Research Council held a workshop in November at the request of Senator Reed to identify the major technical challenges to building that capacity . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--41.txt I am also open to other ideas , including whether or not a separate additional agency is necessary or if these new technical capabilities can be housed in an existing independent Federal agency , such as the Federal Reserve . 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 Should firms that have access to any forms of Fed money be subject to these same limits on risk taking?A .2 . 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-111shrg61651/CHRG-111shrg61651--134.txt 13 -RRB- These large banks are widely perceived -- including by their own management , their creditors , and Government officials -- as too big to fail . 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--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-111shrg61651/CHRG-111shrg61651--24.txt The real source of systemic risk in the banking system , as demonstrated by this crisis , is old-fashioned lending . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--24.txt Turning to the size limitation proposal , let me stress that this proposal does not purport to decrease the present size of any U.S. financial institution nor would it prevent any financial institution from increasing its size through internal growth . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--246.txt The St. Louis Fed 's board caved in to Volcker 's demands and Hoskins was passed-over , although he would be appointed President of the Cleveland Fed in late 1987 , after Volcker no longer was Federal Reserve Board Chairman . 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--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-111shrg61651/CHRG-111shrg61651--137.txt --------------------------------------------------------------------------- To address our `` Too Big to Fail Problem , '' we need to modernize financial regulation to address the problems of today , not of the past . 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-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 Additional benefits would result from making data public to the degree consistent with protecting firm-specific proprietary and supervisory information . 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 We have a high level Firmwide Business Practices Committee which focuses on operational and reputational risk , including conflict management .