The Tarullo show

The book of Daniel

IT IS the job of the Federal Reserve, according to the law that created it in 1913, to supervise banks and “to furnish an elastic currency”, among other things. Those tasks, it turns out, are quite elastic themselves. The Dodd-Frank act of 2010, which overhauled America’s financial regulations in the wake of the crisis, requires the Fed to write no fewer than 58 new regulations. It gives the Fed a say in everything, from how much collateral firms trading certain derivatives should provide their counterparties, to the “diversity policies” of financial institutions.

Dodd-Frank also creates a new position within the Fed, a vice-chairman responsible for regulation, to oversee many of those new rules. The president has never nominated anyone to fill that post, perhaps for fear of the awkward debate that would doubtless ensue during confirmation hearings in the Senate, about how appropriately the Fed was exercising its new powers. In fact, two of the seven seats on the Fed’s board are currently vacant. In the meantime, the administration of the Fed’s ever-expanding powers has fallen, more often than not, to...

from The Economist: Finance and economics http://ift.tt/1M7Y54J