WASHINGTON - The Federal Reserve warned yesterday that the Clinton Administration's plan to consolidate bank and thrift regulators into one agency could compromise the Fed's ability to conduct monetary policy.
"It is the long-held conviction of the board that a hands-on role in banking supervision is essential to carrying out the Federal Reserve's responsibilities for the stability of the financial system and is vital for the effective conduct of monetary policy," the Fed said in a statement.
The Fed issued the statement immediately after the Treasury Department held a briefing for reporters outlining the administration's proposal to create a Federal Banking Commission that would take over many of the regulatory duties now performed by the Fed, the Federal Deposit Insurance Corp., the Office of Thrift Supervision, and the Office of the Comptroller of the Currency.
"While the board recognizes the overlaps in bank supervision that have emerged in recent years, it is essential that any proposal for change preserves the important benefits of the current system," the Fed said.
At yesterday's briefing, a senior Treasury official said the administration has consulted with Fed governors regarding the plan. "We have been conscious of a number of issues that they have raised," said the official, who asked not to be named.
However, Treasury Secretary Lloyd Bentsen said at the briefing that the four agencies in question will need to come to grips with the idea that each will "lose some turf" under the plan.
In fact, the plan would completely eliminate the Office of Thrift Supervision and the Comptroller of the Currency, while the FDIC and the Fed "would continue to be independent agencies," the senior official said.
Complete details of the plan have not been released yet, so it is unclear how much direct supervision of banks would be retained by the Fed. The official said the Fed will hold a permanent seat on the new commission, have access to bank audits, and also have some supervision of those audits.
"Our proposal does not affect the Fed's independence in performing its basic functions," Bentsen said in an editorial printed in the Washington Post yesterday.
The chairmen of both the Senate and House Banking Committees voiced their support for the plan yesterday, saying it is similar to legislation already proposed in Congress.
"Now that we have the administration's full support, we plan to make this a top priority of the committee," says a statement issued by the chairman of the Senate Banking Committee, Donald Riegle, D-Mich., and the ranking minority member of the committee, Alfonse M. D'Amato, R-N.Y.