Bernanke Also Wants New Resolution Authority

More

I just noted Federal Reserve Chairman Ben Bernanke's testimony before the House Financial Services Committee dealing with systemic risk regulation. In his testimony, he also addressed another topic that I've been writing about quite a bit lately: a non-bank resolution authority. Such an agency would work to wind down large financial institutions, much like the Federal Deposit Insurance Corporation does for banks. If such an authority exists, the government will not need to bail out firms that appear too big to fail. I was pleased to hear that Bernanke favors the creation of this new authority.

Bernanke asserts that the creation of such a resolution authority would have the following implication:

The availability of a workable resolution regime also would replace the need for the Federal Reserve to use its emergency lending authority under section 13(3) of the Federal Reserve Act to prevent the failure of specific institutions.

I think that's true. But it's fascinating that Bernanke would state this. He's saying that if the U.S. had this new resolution authority, the Federal Reserve would not need its emergency lending function. That's currently a very important power of the Fed. I'm impressed to hear the Federal Reserve chairman concede that power before a Congressional committee. Of course, it may come back to haunt him, as Congress has the chairman's own words as a basis for taking that power away if a resolution authority is put into place.

Jump to comments
Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
Get Today's Top Stories in Your Inbox (preview)

A Delightful, Pixar-Inspired Cartoon About the Toys in Your Cereal Box

The story of an action figure and his reluctant sidekick, who trek across a kitchen in search of treasure.


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Juice Cleanses: The Worst Diet

A doctor tries the ever-popular Master Cleanse. Sort of.

Video

Why Did I Study Physics?

Using hand-drawn cartoons to explain an academic passion

Video

What If Emoji Lived Among Us?

A whimsical ad imagines what life would be like if emoji were real.

Video

Living Alone on a Sailboat

"If you think I'm a dirtbag, then you don't understand the lifestyle."

Feature

The Future of Iced Coffee

Are artisan businesses like Blue Bottle doomed to fail when they go mainstream?

Writers

Up
Down

More in Business

Just In