John Berry, of Forbes, makes a pretty good case for more Fed oversight of I-banks. From Economist’s View:
Federal Reserve examiners now are operating inside the nation’s biggest investment banks, and by all accounts the banks are happy to have them looking over their shoulders.
In a world of tight liquidity and shaken confidence, the Fed presence gives valuable reassurance to counterparties that the investment banks, at least the ones that are primary dealers in government securities, are creditworthy.
But the Primary Dealer Credit Facility … was created under a provision of the Federal Reserve Act applicable only in an emergency. Eventually, the crisis will pass, and when it’s over, ”we will have to take this window back,” Fed Chairman Ben S. Bernanke told a Senate Banking Committee…
Congress ought not to let that happen. … First, the major investment banks have become much too important in the financial system not to have access to the Fed in its role as a lender of last resort.
Second, the Securities and Exchange Commission, the investment banks’ primary regulator, simply doesn’t have the expertise to oversee the banks’ financial activities and their safety and soundness
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