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St. Louis Federal Reserve President James Bullard said Thursday at Texas A&M University that current financial reforms proposed in Congress might not prevent a future economic crisis and might actually hurt the Fed's ability to deal with one.
Largely echoing remarks he made Tuesday in Richmond, Virginia, Bullard said that a strong central bank "with appropriately broad regulatory authority to provide the nation with the best chance of avoiding a future crisis."
Bullard said that the Fed should have direct access to financial information so that it can fully respond to crises in its role as a lender of last resort.
"The Fed will also be at the center of all future crises because of its lender of last resort role, the reform response should be to provide the Fed direct access to detailed information across the entire financial landscape - not less, as is the focus of current policy discussions," he said. "Only a few of the current financial regulatory reform proposals are likely to help prevent future crises."
Commenting on regulatory proposals in Congress, the St. Louis chief said that multi-member financial oversight council would not be effective in future crises because it would not be able to make quick, decisive decisions.
"The Fed would be better at navigating this type of decision-making, which occurs commonly in monetary policy," he said on Tuesday. "The Fed is also more politically independent than such a council could be."
The comments echo similar sentiment expressed by Ben Bernanke during remarks to Congress on Wednesday and Thursday, in which he said that stripping the Fed of regulatory authority would be a "grave mistake."
Bullard went on to add that proposed restrictions on the Fed's ability to lend money to non-banking entities during "unusual and exigent circumstances," will probably exacerbate a future financial crisis because the central bank will have less authority to act.
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