They can regulate banks. They can't regulate the financial market.
Instead they are expected regulate banks in such a way to stabilize the financial market. This is not to say that financial markets are completely un-regulated. But you'll need to look at the SEC, Sarbanes Oxley and other instutions there. When the Fed was created, banking regulation was considered a sufficient tool to get the job done.
This assumption proved incorrect because financial institutions were able to morph into shadow banks. Those were the institutions that failed. Congress is going to have to expand the powers of the Fed if the Fed is supposed to have the power necessary to fix this problem.
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Date: 26/4/10 22:54 (UTC)Instead they are expected regulate banks in such a way to stabilize the financial market. This is not to say that financial markets are completely un-regulated. But you'll need to look at the SEC, Sarbanes Oxley and other instutions there. When the Fed was created, banking regulation was considered a sufficient tool to get the job done.
This assumption proved incorrect because financial institutions were able to morph into shadow banks. Those were the institutions that failed. Congress is going to have to expand the powers of the Fed if the Fed is supposed to have the power necessary to fix this problem.