Fed President: Great Depression Possible If Federal Reserve Stripped Of Bank OversightSubmitted by bobbyw24 on Wed, 02/17/2010 - 15:02
The U.S. risks falling into another "Great Depression" if the Federal Reserve is stripped of its bank oversight powers, a top Fed official warned Tuesday.
In his first public speech since becoming the newest regional Fed chief, Minneapolis Fed President Narayana R. Kocherlakota took aim at calls for the nation's central bank to relinquish its bank supervision authority.
Acknowledging that the Fed made "significant mistakes" as a bank regulator, Kocherlakota nonetheless said the central bank's actions in preventing the financial panic of 2007-08 from mushrooming into another Great Depression -- including an expanded cheap lending program for financial institutions and last year's publicly-released bank "stress tests" -- was a "success" enabled because of its role as a bank supervisor.
"Would we have had Depression 2.0 without the Federal Reserve's using this range of policies? We will never know for sure," the 46-year-old, the youngest of the 12 regional Fed presidents, said in his prepared remarks. "However, it is clear to me that these policies worked as intended...These policies eliminated the possibility of Depression 2.0." [Emphasis in original]