Federal power should be stripped, says Bessent
In a recent essay published in the Wall Street Journal, Treasury Secretary Scott Bessent has advocated for a comprehensive review of the Federal Reserve's role in bank regulation. The call for action comes as Bessent believes the Federal Reserve has overstepped its bounds by taking on banking regulation, a responsibility that was not part of its original mandate when it was established in its current form in 1913.
Bessent suggests an honest, independent, and nonpartisan review of the entire Federal Reserve institution, including monetary policy, regulation, communications, staffing, and research. The review would focus on the Fed's duties in regulating the nation's banks, a responsibility that is currently shared among the Fed, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.
The call for a review follows criticism from Bessent and Jerome Powell, the Chair of the Federal Reserve, regarding bank supervision and regulation all being under the purview of one member on the Fed's Board of Governors. Both Bessent and Powell have expressed concerns about the concentration of power in this area.
Over time, through crises such as the Great Depression and Great Recession, the Fed was gradually ceded more oversight over the nation's banks. However, Bessent believes that the Fed has veered away from its core mission of promoting full employment, stable prices, and moderate long-term interest rates by taking on banking regulation.
Advocates for the Fed argue that the soundness of the banking system is interconnected with the country's financial stability, part of the Fed's mission as an institution. The Fed's Vice Chair for Supervision, Michelle Bowman, is currently responsible for a comprehensive review of the capital requirements for the nation's largest banks.
Jerome Powell, in response to Bessent's call for a review, stated that any changes to the Fed's functions or structure are ultimately up to Congress. The identity of the person proposed by Treasury Secretary Bessent to conduct this comprehensive review of the central bank is not specified in the available search results.
The story has been updated with additional content. Stay tuned for further developments on this topic.
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