WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke is waging a battle against Senate efforts to strip the Fed from banking supervision.
Bernanke, in a paper to Senate Banking Committee Chairman Christopher Dodd, D-Conn., and the panel’s top Republican Richard Shelby of Alabama, argues that stripping the Fed of such power would deprive the central bank of information that factors into the setting of interest rates to influence overall economic activity.
The Fed chief also argues that the Fed would lose insights into the health of not only individual banks but also of the overall banking system. That would heighten risks around the Fed’s role as “lender of last resort.”
The Fed lends money to banks when they can’t get it in private markets, a key ingredient to keeping the financial system running during times of stress.
