World Bank President Robert Zoellick said Monday that the Treasury Department, not the Federal Reserve Board, should be given authority to regulate systemic risks.
In a speech at Johns Hopkins University, Zoellick questioned how the authority would affect the Fed's independence and conflict with its monetary policy role. Instead, he said investing the Treasury with the authority would make it more accountable to Congress since it is in the executive branch.
"In the United States, it will be difficult to invest the independent and powerful technocrats at the Federal Reserve with more authority," Zoellick said. "My reading of recent crisis management is that the Treasury Department needed greater authority to pull together a bevy of different regulators. Moreover, the Treasury is an executive department and therefore the Congress and the public can more directly oversee how it uses its added authority." The administration has proposed giving the power to the central bank with a council of regulators acting as advisers. But giving such added power to the Fed has been met by resistance from lawmakers.