- The Washington Times - Saturday, May 9, 2009

The White House told industry officials Friday that it is leaning toward recommending that the Federal Reserve become the supercop for “too big to fail” companies capable of causing another financial meltdown.

According to officials who attended a private one-hour meeting between President Obama’s economic advisers and representatives from about a dozen banks, hedge funds and other financial groups, the administration made it clear it was not inclined to divide the job among various regulators as has been suggested by industry and some federal regulators.

“The idea of having a council of regulators was pretty much vetoed,” said one participant.

Treasury Secretary Timothy F. Geithner, who briefly attended the meeting but did not identify the Fed specifically as his top choice, told the group that one organization needs to be held responsible for monitoring systemwide risk. He said such a regulator should be given better visibility into all institutions that pose a risk to the financial system, regardless of what business they are in.

“Committees don’t make decisions,” Mr. Geithner told the group, according to another participant.

Officials from the Treasury Department and National Economic Council, which hosted the meeting, told participants that the Fed was considered the most likely candidate for the job, according to several officials who attended or were briefed on the discussions.

The administration officials said a legislative proposal would likely be sent to Capitol Hill in June with the expectation that the House Financial Services Committee, led by Rep. Barney Frank, Massachusetts Democrat, would consider the measure before the July Fourth recess.

The officials requested anonymity because the meeting had not been publicly announced and they were not authorized to discuss it.

A Treasury Department statement provided to the Associated Press on Friday confirmed Mr. Geithner’s position that he wants a “single independent regulator with responsibility for systemically important firms and critical payment and settlement systems.”

A spokesman said Mr. Geithner also is open to creating a council to “coordinate among the various regulators, including the systemic risk regulator.”

Industry officials say such a council would likely serve as an advisory group and would not be given the authority that a “systemic risk regulator” would.

The Fed itself hasn’t taken a position on whether it should have the job, although Chairman Ben S. Bernanke has said the Fed would have to be involved in any effort to identify and resolve systemwide risk.

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