By Karey Wutkowski and Kevin Drawbaugh
WASHINGTON, June 8 (Reuters) - U.S. Republican lawmakers intend to oppose the Federal Reserve getting new powers to regulate systemic risk in the economy, according to a draft discussion document obtained by Reuters on Monday.
Republicans believe the Fed should be stripped of its current regulatory and supervisory responsibilities and should instead focus on its core mission of monetary policy, the document from Republican staff members said.
The document also indicates that Republicans want systemically important financial firms' troubles to be resolved through the existing bankruptcy system, not through a new resolution authority.
The document provides insight into Republicans' plan to provide an alternative to the Democrat-driven effort to overhaul financial regulation reform.
Democrats, who hold a majority in both chambers of Congress and also control the White House, will be the leading voice as lawmakers embark on the daunting task of restructuring how banks, hedge funds, derivatives, and other financial firms and securities are policed.
The Obama administration intends to unveil next week its own sweeping plan to overhaul financial regulation, according to a source familiar with Treasury thinking, with Treasury Secretary Timothy Geithner expected to testify to lawmakers on June 18.
The Republicans' alternative plan is designed to stop government bailouts of troubled financial firms and to shrink the Fed's responsibilities, according to the document.
Some leading Democrats have pulled back from a plan to make the Fed the primary systemic risk regulator, instead promoting more of a systemic risk council made up of multiple regulators.
'Rather than massively expanding the Federal Reserve's mission and further enshrining a failed government policy of rescuing 'too big to fail' institutions, Republicans support scaling back the Fed's authorities so that it can focus on conducting monetary policy and unwinding the trillions of dollars in obligations it has amassed during the financial crisis,' the document said.
The Republicans' alternative would be a 'market stability and capital adequacy board' made up of outside experts and representatives from the financial regulatory agencies.
The plan also calls for the merger of the Office of Thrift Supervision, which largely regulates mortgage lenders, and the Office of the Comptroller of the Currency, which regulates many of the nation's largest banks.
The supervisory functions of the Federal Reserve and the Federal Deposit Insurance Corp would be folded into the new entity.
Further, the Republican plan provides an alternative to a widely floated idea of giving the FDIC the power to unwind large, troubled non-banks.
Instead, those financial firms would be forced to go through the traditional bankruptcy process.
(Reporting by Karey Wutkowski, Kevin Drawbaugh and John Poirier; Editing by Tim Dobbyn, Gary Hill) Keywords: FINANCIAL/REGULATION REPUBLICANS (E-mail:karey.wutkowski@thomsonreuters.com +1 202 898 8374) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, June 8 (Reuters) - U.S. Republican lawmakers intend to oppose the Federal Reserve getting new powers to regulate systemic risk in the economy, according to a draft discussion document obtained by Reuters on Monday.
Republicans believe the Fed should be stripped of its current regulatory and supervisory responsibilities and should instead focus on its core mission of monetary policy, the document from Republican staff members said.
The document also indicates that Republicans want systemically important financial firms' troubles to be resolved through the existing bankruptcy system, not through a new resolution authority.
The document provides insight into Republicans' plan to provide an alternative to the Democrat-driven effort to overhaul financial regulation reform.
Democrats, who hold a majority in both chambers of Congress and also control the White House, will be the leading voice as lawmakers embark on the daunting task of restructuring how banks, hedge funds, derivatives, and other financial firms and securities are policed.
The Obama administration intends to unveil next week its own sweeping plan to overhaul financial regulation, according to a source familiar with Treasury thinking, with Treasury Secretary Timothy Geithner expected to testify to lawmakers on June 18.
The Republicans' alternative plan is designed to stop government bailouts of troubled financial firms and to shrink the Fed's responsibilities, according to the document.
Some leading Democrats have pulled back from a plan to make the Fed the primary systemic risk regulator, instead promoting more of a systemic risk council made up of multiple regulators.
'Rather than massively expanding the Federal Reserve's mission and further enshrining a failed government policy of rescuing 'too big to fail' institutions, Republicans support scaling back the Fed's authorities so that it can focus on conducting monetary policy and unwinding the trillions of dollars in obligations it has amassed during the financial crisis,' the document said.
The Republicans' alternative would be a 'market stability and capital adequacy board' made up of outside experts and representatives from the financial regulatory agencies.
The plan also calls for the merger of the Office of Thrift Supervision, which largely regulates mortgage lenders, and the Office of the Comptroller of the Currency, which regulates many of the nation's largest banks.
The supervisory functions of the Federal Reserve and the Federal Deposit Insurance Corp would be folded into the new entity.
Further, the Republican plan provides an alternative to a widely floated idea of giving the FDIC the power to unwind large, troubled non-banks.
Instead, those financial firms would be forced to go through the traditional bankruptcy process.
(Reporting by Karey Wutkowski, Kevin Drawbaugh and John Poirier; Editing by Tim Dobbyn, Gary Hill) Keywords: FINANCIAL/REGULATION REPUBLICANS (E-mail:karey.wutkowski@thomsonreuters.com +1 202 898 8374) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.