Money Matters, Simplified.
Bernanke calls on Congress to take regulatory steps
by Ishita Sood - October 24, 2009 - comments
Fed Chief Ben Bernanke urging Congress to take regulatory steps for a sound economy
Washington, October 24 -- Federal Reserve Chairman Ben S. Bernanke, in a speech Friday, urged the Congress to fix the nation's financial system and prevent it from falling into a crisis.
Bernanke was speaking in Chatham, Mass., at a conference titled "After the Fall -- Re-evaluating Supervisory, Regulatory, and Monetary Policy" sponsored by the Federal Reserve Bank of Boston.
"With the financial turmoil abating, now is the time for policymakers to take action to reduce the probability and severity of any future crises," he said. "Regulators and supervisors can do a great deal, but comprehensive financial reform requires action by the Congress.”
Bernanke’s views on financial regulation
In spite of it being the seventh month of Obama administrations’ call for reformation of financial regulation, the process has been slow in the Senate. Bernanke, who awaits Senate affirmation for a second four-year term, says that future crisis will lessen once financial regulations are reformed.
The Fed Chief also supports the creation of an agency that could review and prevent systemic risk.
He also discussed the Fed's work on executive compensation."Compensation plans that encourage, even inadvertently, excessive risk-taking can pose a threat to safety and soundness," he said.
The Fed is also adjusting its methods for supervising banks and targeting the current system.
Stringent actions
“All financial regulators, including of course the Federal Reserve, must take a hard look at the experience of the past two years, correct identified shortcomings, and improve future performance," Bernanke said.
Even though the policy makers have seen improvements toward securing a sustained economic recovery, Bernanke said, additional regulatory steps need to be taken to ensure a sound economic future.
"Regulators and supervisors can do a great deal, but comprehensive financial reform requires action by the Congress," he said.
We need to begin at the most elementary level," he further said. "Too many households don't understand the basics of budgeting, the basics of credit, and the basics of investment." We have seen that flawed financial instruments can both harm families and impair financial stability."
According to Bernanke, the central bank will conduct "more frequent, broader, and more comprehensive" checks of the U.S. financial system.