Obama to give fed even more power

Obama to Give Fed Even More Power

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Kevin Drawbaugh and Rachelle Younglai
May 8, 2009

The Obama administration is expected to propose legislation by June calling for the U.S. Federal Reserve to play a central role in regulating systemic risk in the economy, trade association sources said on Friday.

Now that the U.S. bank stress tests are over, the administration is refocusing on a drive to tighten regulation of banks and markets to prevent another financial crisis like the one that is currently ravaging economies worldwide.

Systemic risk refers to problems in the financial system large enough to damage the overall economy. For instance, the government last year bailed out insurer American International Group because its failure was seen as a systemic risk.

Beyond that, there is little agreement among officials about the much-debated idea of setting up a government regulator to monitor and manage systemic risk.

The administration left the door open to further discussion in remarks by a Treasury Department spokesman.

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