WASHINGTON — Federal Reserve Chairman Ben Bernanke Thursday sought to stamp out any lingering Capitol Hill concerns that the central bank is seeking to become some uber-regulator of the financial system.

Bernanke made clear that he does want Congress to empower the Fed with tools to regulate large, interconnected banks and nonbanks to ensure they don't pose a threat to the financial system. But when it comes to monitoring the broader financial system, all regulators should be involved, he said.

"An oversight council made up of the agencies involved in financial supervision and regulation should be established," said Bernanke, adding that the group should identify risks to financial stability, address regulatory gaps and coordinate on efforts to protect the financial system.

One of the most controversial elements of the Obama administration's sweeping proposal to update the nation's finance rules pertained to the Federal Reserve. Critics argue that a White House proposal to put the Fed in charge of regulating systemic risk would undermine the Fed's monetary policy role. They also argue that the Fed failed to take adequate steps to protect consumers leading up to the financial crisis, therefore the Fed is now undeserving of greater powers.

Bernanke said the testimony Thursday didn't mark a major shift in the central bank's position, but in it, he more fervently stressed that systemic-risk regulation should be a group effort. One lawmaker welcomed the testimony as a significant shift.

"May I take the opportunity to congratulate?" Rep. Paul Kanjorski, D-Pa., said at the hearing. "From what I heard, you've now determined that you're not supportive of greater powers for the Federal Reserve but would prefer the council in systemic risk regulation."

"There's not really a change," Bernanke responded. "I think there's been some misunderstanding. We have never supported, and the administration has never supported, a situation in which the Fed would be some kind of untrammeled super-regulator over the entire system."

Kanjorski still welcomed the chairman's comments as a step forward.

"I think we're on a course to now perhaps put together something that can be accomplished," Kanjorski said.

Bernanke has always publicly-backed having Congress grant a council of regulators the appropriate tools to monitor the broad financial system. The Obama administration has proposed that the Fed and other regulators would work together on a council that would be headed by the Treasury Department, and the Fed has supported that. But as Congress works on legislation, it is unclear how much power the council of regulators would have versus the Fed.

The Fed chief Thursday made his position more clear, saying that all federal regulators should monitor financial stability. He said the central bank is supportive of the White House plan to put the Treasury in charge of the council so that it can mediate differences among agencies, among other things.

But the council's powers should only go so far, according to Bernanke, who argued that authority to oversee the nation's largest, riskiest firms should be housed at the Fed.

"I would not at this point recommend the systemic risk council getting into the weeds of setting detailed capital requirements," said Bernanke. He argued that the council should not micromanage any one part of the financial system.

Bernanke's position could still meet criticism from other banking regulators who would want to see their agencies play a greater role in overseeing individual firms that are systemically-risky. Debate over the issue is likely to continue even as the outlook for new financial regulation has seemed to turn brighter of late.

"We have had debate and will have further debate about exactly what the role of the Federal Reserve will be in the systemic risk regulation," said House Financial Services Committee Chairman Barney Frank, D-Mass. Frank said he sees consensus on what the Fed's role should be as a systemic risk regulator. He added that earlier this year, he and others thought the Fed "would have a larger role than it looks like it will have, that it would be part of a conciliar structure."

While lawmakers are making significant progress on proposals aimed at updating the nation's finance rules, Frank said one issue that seems to be heavily debated is the consumer protection agency.

Democrats want to strip federal banking regulators of their power to write and enforce rules protecting consumers and give it to a new agency. Regulators, however, argue that doing so would hurt their efforts to protect the safety and soundness of the banking system.

On that issue, Bernanke's position is clear. He continued to voice concern about efforts to strip the consumer protection role from the central bank.

"I think there are some costs to separating enforcement and rule-writing," Bernanke said in response to a question at the hearing.

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