In a speech in London, US Treasury Secretary Henry Paulson Jr. said the Federal Reserve needs a statutory mandate to anticipate and prevent risks across the entire financial system.
“The Fed has neither the clear statutory authority nor the mandate to attempt to anticipate and prevent risks across our entire financial system,” Paulson said at Chatham House. “Therefore we should consider how most appropriately to give the Federal Reserve the information and authority necessary to play its expected role of market stability regulator. The Fed would need the authority to access necessary information from complex financial institutions — whether it is a commercial bank, an investment bank, a hedge fund, or another type of financial institution — and the tools to intervene to mitigate systemic risk in advance of a crisis.”
He also called the current regulatory structure “outdated.”
A transcript of Paulson’s remarks can be found on the US Treasury website at http://www.ustreas.gov/press/releases/hp1064.htm.