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)

CrossFit Versus Yoga: Choose a Side

How a workout becomes a social identity


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

CrossFit Versus Yoga: Choose a Side

How a workout becomes a social identity

Video

Is Technology Making Us Better Storytellers?

The minds behind House of Cards and The Moth weigh in.

Video

A Short Film That Skewers Hollywood

A studio executive concocts an animated blockbuster. Who cares about the story?

Video

In Online Dating, Everyone's a Little Bit Racist

The co-founder of OKCupid shares findings from his analysis of millions of users' data.

Video

What Is a Sandwich?

We're overthinking sandwiches, so you don't have to.

Video

Let's Talk About Not Smoking

Why does smoking maintain its allure? James Hamblin seeks the wisdom of a cool person.

Writers

Up
Down

More in Business

Just In