World Bank President Robert Zoellick seems to be firmly against the idea of giving the Federal Reserve more power over banks, as the Obama administration has proposed. Mr. Obama’s Treasury has recommended that the Fed get oversight of too-big-to-fail financial institutions.
In a speech to be given later today at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University in Washington, the Wall Street Journal reports that Mr. Zoellick will come down hard on central bankers, saying “Central banks failed to address risks building in the new economy…[they] fell down as regulators—and that the Treasury, which is more accountable to Congress, should be given the authority to regulate big financial institutions, not the Fed.”
“My reading of recent crisis management is that the Treasury Department needed greater authority to pull together a bevy of different regulators”, says Zoellick, “Moreover, the Treasury is an executive department, and therefore Congress and the public can more directly oversee how it uses any added authority.”
Zoellick also will warn of the “next upheaval” in the international economic order, and it will involve the greenback, Bloomberg reports. The trade-weighted dollar index is being battered by foreign currencies, down 11% since President Obama took office, leaving its long-held status as the dominant reserve currency in doubt in some circles. Zoellick warns it could be the end of an era. “The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency,” Mr. Zoellick says.
Zoellick also will urge intensified coordination among all countries to be sure that economic growth continues.
Excerpts of Mr. Zoellick’s remarks were released in advance of his speech by the World Bank.