(Dec. 2) -- The fight to tame U.S. oversight of banks and Wall Street heated up Wednesday and now looks likely to dominate this week's hearing on the renomination of Federal Reserve Chairman Ben Bernanke.
The House Financial Services Committee voted 31-27 along party lines to send an overhaul of financial regulation to the floor of the House for debate next week, a victory for chairman Barney Frank, D-Mass., but not a complete one. Members of the Congressional Black Caucus boycotted the vote, saying they want greater financial help for their communities amid all the fiscal stimulus measures of the past year. Those votes -- the caucus includes 41 representatives -- could be pivotal when the bill is put to a vote by the full House.
Perhaps the most controversial part of the bill, dubbed the Financial Stability Act, would increase congressional oversight of the Fed by broadening the Government Accountability Office's authority over the Fed's financial operations. Critics of the bill argue that any increase in political supervision of the Fed would weaken the U.S. central bank's credibility. Proponents say that credibility was already undercut more by the failure of the Fed and other agencies to foresee and prevent the subprime-mortgage meltdown that cascaded into a global recession.
Bernanke will likely be asked to address the matter himself on Thursday before the Senate banking committee, which is considering his nomination by President Obama to a second term as the country's chief financial steward. That hearing and any discussion of new restraints on the Fed were already expected to be animated, and Sen. Bernie Sanders, I-Vt., made sure of that Wednesday evening.
Sanders placed a hold on the Bernanke nomination, faulting both the Fed chairman's role in the financial crisis and his chairmanship of the President's Council of Economic Advisers under President George W. Bush. "The American people overwhelmingly voted last year for a change in our national priorities to put the interests of ordinary people ahead of the greed of Wall Street and the wealthy few," Sanders said. "What the American people did not bargain for was another four years for one of the key architects of the Bush economy.
" The hold will likely delay the renomination, but Bernanke appears to have enough support from Republicans and Democrats in the Senate to keep his job. The tenor of Thursday's hearing could indicate which way it will go.
A host of financial-regulation reform bills under consideration in Congress have already been subjected to repeated rounds of disparagement and lobbying from financial firms, which object to a tighter leash but have been restrained in their public criticism by the economic pain and popular anger of the past year. On the other side of the fight, consumer advocates have vociferously called for greater regulation, and the Obama administration has made passage of a bill one of its top economic priorities.
But the shape of a final measure -- for both the House legislation and a similar measure in the Senate -- is far from clear and might not take form before next year.
The thrust of the House bill aims to strengthen oversight across the spectrum of the finance industries by creating a council, headed by the Treasury, that will seek to identify and address systemic risks in the marketplace that could lead to another financial crisis. It would consolidate authority of the Fed, the Securities and Exchange Commission and other regulators to deal with crises, create new safeguards for insurance companies like AIG and other nonbanks -- so that none becomes "too big to fail" -- and force lenders to assume a greater portion of the risk in their loans rather than pass along all the risk to investors. The bill would also place limits on any future government bailouts.
The bill is likely to undergo changes by the full House, and if it passes there perhaps wholesale revision once the Senate finishes work on its version. Work on financial reform has stalled in the Senate Banking Committee, where Chairman Chris Dodd, D-Conn., is trying to get Republicans to contribute to and support his proposal.
Source: http://www.sphere.com/2009/12/02/fight-over-finance-oversight-and-bernanke-gets-hotter/#comments
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