Tuesday, July 8, 2008
Federal Reserve Board Chairman Ben S. Bernanke spoke on Financial Regulation and Financial Stability at the Federal Deposit Insurance Corporation's Forum on Mortgage Lending for Low and Moderate Income Households, Arlington, Virginia, on July 8, 2008. On yesterday's Memorandum of Understanding between the SEC and Federal Reserve, he stated:
Fed-SEC cooperation is taking place within the existing statutory framework with the objective of addressing the near-term situation. In the longer term, legislation may be needed to provide a more robust framework for the prudential supervision of investment banks and other large securities dealers. In particular, under current arrangements, the SEC's oversight of the holding companies of the major investment banks is based on a voluntary agreement between the SEC and those firms. Strong holding company oversight is essential and thus, in my view, the Congress should consider requiring consolidated supervision of those firms, providing the regulator the authority to set standards for capital, liquidity holdings, and risk management.More generally, in the longer term, the Congress should consider whether our current regulatory structure needs to be modernized to address the changes that have occurred in the structure of the financial system, including the enormous growth of nonbank financial institutions and the development of new financial products.