US Senate panel opposes giving more teeth to Federal Reserve

19 June 2009

President Barck Obama's new financial-market reorganisation package that is expected to deal with banking, mortgages, underwriting, and other financial instruments traded in the market came under sharp criticism in the Senate Banking Committee meeting yesterday.

''They're very angry, and they are worried. And they are wondering who's looking out for them,'' said Senator Christopher Dodd, a Connecticut Democrat and chairman of the Senate Banking Committee.

Under Obama's plan, the Federal Reserve will attain more power to oversee institutions deemed so big or influential in the market that their failure could seriously damage the economy. (See: Obama to unveil financial reforms plan tomorrow).

The plan envisages that a council of federal regulators, including the Fed, would help monitor the market for risk. But the Fed would ultimately be accountable for ensuring companies that do not make overly risky bets.

The Congress, however, doubts whether these measures would be enough to prevent another economic meltdown in the future.

In testimony before the panel, Treasury Secretary Timothy Geithner defended the proposal as the nation's best shot.