Senate Seeks More Control Over the Fed

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New York Fed President Would Need Senate Approval in Dodd Bill

March 15 (Bloomberg) -- The Federal Reserve Bank of New York president, who supervises five of the seven largest U.S. banks, would be subject to White House appointment and lawmakers’ approval under legislation proposed today.

Also, one member of the Fed Board of Governors would be designated vice chairman for supervision, and no firm under Fed oversight would be allowed to vote for or have past or present employees serve as directors of regional Fed banks, according to the bill to overhaul financial regulation. Senate Banking Committee Chairman Christopher Dodd, a Democrat from Connecticut, unveiled the proposed legislation in Washington.

The changes may intensify political influence on the central bank as policy makers try to decide when and how fast to raise interest rates. If approved, the legislation would curtail the Fed’s bank-supervision powers to oversight of about 35 of the biggest firms from 5,000 banks and house a new consumer financial-protection agency at the central bank.

Under Dodd’s proposal, the Fed would supervise bank holding companies with more than $50 billion in assets. Dodd and other lawmakers criticized the central bank for lax oversight that in part led to the financial crisis.

Congressional auditors would have the power to examine any emergency-lending program set up by the Fed, and the Board of Governors will get a “formal responsibility to identify, measure, monitor and mitigate risks to U.S. financial stability,” according to a summary released by the committee.

http://www.businessweek.com/news/2010-03-15/new-york-fed-president-would-need-senate-approval-in-dodd-bill.html

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