The proposed agency to regulate consumer financial products will result in a duplication of efforts because financial institutions would be examined by the agency and their existing regulator, Federal Reserve Chairman Ben S. Bernanke said in response to a question from Mazuma Credit Union President/CEO Rob Givens.
Bernanke, who made his comments during a town hall meeting being aired this week on PBS' Newshour, declined to take a position on the wisdom of the new agency and said he "can understand the motivation for creating such an agency."
But Bernanke also said that leaving the examination powers with the regulatory agencies and only giving the new agency the power to write regulations would be problematic as well.
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"That also has some issues, because then the rule-writers would not be together with the examiners. They wouldn't get the feedback, they wouldn't get the knowledge that the examiners get every day on the ground, in banks. So it's a tough issue, and I know Congress is going to be wrestling this for some time," Bernanke said.
Givens, whose credit union is headquartered in Kansas City, told Bernanke that he was concerned because "creating a new federal agency separating some of those responsibilities and then adding perhaps some additional responsibilities from the Fed for consumer regulation would in fact put an additional burden on small institutions which would then cause them to fail and leave more too-big-to-fail people out there."
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