After suffering sustained criticism of its role in the financial crisis, the US Federal Reserve looked set to emerge from an overhaul of financial regulations with its jealously guarded independence intact.
In a big victory for the central bank, lawmakers hammering out a final version of a Wall Street reform bill agreed to drop two provisions the Fed had warned would subject its economic decision-making to outside political influence.
Lawmakers seeking to resolve differences between financial reforms passed by the House of Representatives and the Senate dropped a provision that would have opened the Fed’s interest-rate policy to congressional audits, opting instead to examine less sensitive areas. Lawmakers also agreed to abandon a plan to make the head of the New York Federal Reserve Bank a political appointee.
The final bill will be send to President Barack Obama for his approval by early July.
Despite widespread criticism on Capitol Hill that the Fed is too close to the banks it regulates, the central bank is poised to emerge as the most powerful financial regulator under the broadest rewrite of financial rules since the 1930s.
The Fed had been lambasted for failing to stem the risky lending that fuelled the US housing bubble and for bailing out financial firms after the bubble popped. It has acknowledged its oversight was too complacent before the 2007-2009 financial crisis, but has said it has already taken steps to amend its ways.
The broader reforms under consideration would crimp financial firms’ profits and saddle them with tighter regulations. They would establish new consumer protections and set up a process to dismantle troubled firms. Reuters