Former Federal Reserve Chairman Paul Volcker, according to his remarks prepared for a congressional hearing tomorrow and obtained by Bloomberg News, will on Wednesday advocate that because monetary policy and bank supervision are “inextricably intertwined” the Fed, being uniquely suited to supervise complex financial organizations, should retain its power to supervise banks.
Bloomberg: “Monetary policy and concerns about the structure and condition of banks and the financial system more generally are inextricably intertwined,” Volcker will say. “Neither monetary policy nor the financial system will be well served if our central bank is deprived from interest in, and influence over, the structure and performance of the financial system.”
According to Volcker, “it would be a really grievous mistake to insulate the Federal Reserve from direct supervision of systemically important financial institutions”.
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