The Power of the Federal Government

However, the biggest questions we have heard are linked to the increased power of the Fed and not a few raised their objections to his new role. The Working Group of Investors (led by former chairmen of the SEC William Donaldson and Arthur Levitt), which brings together some of the largest money managers in the country, has expressed support for the creation of an independent body acting as a watchdog for the management of risks throughout the financial system. The proposed body, the Supervisory Board or SROB Systemic Risk “have permanent staff and independence of government agencies and financial institutions, which is good news not being subject to other interests but by design, would difficulties in coordinating actions with other agencies involved in the financial system. Also for the U.S. Senate the idea of regulating the financial system Fed creates resistance because it is considered that the Federal Reserve meets many functions (dealing with monetary policy, international banking, consumer protection and the role of lender of last resort) to develop a greater role.

In this sense, we must recognize that the multiplicity of functions can effectively remove the main objectives since the Fed must find a balance between them for which it has limited tools. Certainly you should not miss the controversy generated by the possibility of a greater power for the Fed, especially since the poor performance has had in preventing the development of the crisis. Is that if one wants to see so what better way to regulate the financial system had so far the Fed to do it through a prudent monetary policy enough to prevent the emergence of financial bubbles? Since the Working Group of Investors, points to the loss of confidence engendered by the mistakes made during the crisis Fed: Credibility (Fed) was tainted by the slightest credit policies adopted and weak regulatory oversight which allowed the institutions raise the leverage of their balance sheets.

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