Regional Feds Face Uncertainty

Wall Street Journal (04/01/08) P. A4; Ip, Greg
Under the blueprint for revamping financial regulation released by Treasury Secretary Henry Paulson on March 31, the Federal Reserve would become a market-stability regulator and remain in charge of gathering and analyzing data from banks and all other financial institutions. Additionally, the central bank would offer input on regulatory requirements for financial institutions; but it would no longer oversee state-chartered banks and bank holding companies. Such front-line supervision has been provided by the 12 regional Federal Reserve Banks, and forcing them to relinquish these duties to a new "prudential financial regulatory agency" would result in some staffing changes. The regional Fed banks already have downsized as check-clearing services declined due to the increased popularity of debit cards and electronic bill payment, and officials worry that further downsizing will hurt morale. Additionally, the blueprint calls for the regional banks to give up control of payment systems that shift money and securities between commercial banks, with the central bank becoming the regulator of the systems instead.