The Shadow Financial Regulatory Committee is recommending Congress strip the Federal Reserve Board of its role as supervisor of bank holding companies.
Oversight responsibility instead should be split between the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. said the panel, made up of 13 banking experts who review federal policy, at its yearend meeting this week.
Under the Shadow Financial Committee's plan, the comptroller would supervise national banks and their holding companies while the FDIC would oversee state-chartered banks and their holding companies. Limiting the Fed to control of monetary policy would eliminate "a clear conflict of interest" inherent in the agency's duties, a statement from the committee said.
The group gave as an example that the Fed, as regulator, has complained about lax bank lending standards while simultaneously encouraging financial institutions to make risky loans in foreign countries to control the world financial crisis.