By James Quinn, Wall Street Correspondent
US Treasury Secretary Henry "Hank" Paulson believes the Federal Reserve should have a greater role in the oversight of financial institutions in the wake of the global credit crisis.
Mr Paulson, the former Goldman Sachs chairman and chief executive, wants to speed up the Bush administration's move to address what he believes is the United States' "outdated" regulatory oversight structure of banks and other complex financial houses.
In a speech yesterday, Mr Paulson said the changes were needed given the collapse of Bear Stearns and the potential for other banks to fail, but stopped short of proposing expanding the central bank's powers.
"We should quickly consider how most appropriately to give the Fed the authority to access necessary information from highly complex financial institutions and the responsibility to intervene in order to protect the system, so they can carry out the role our nation has come to expect - stabilising the overall system when it is threatened," said Mr Paulson in Washington.
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Although he did not express how the US Treasury would implement the changes, it is possible his department could do so administratively, therefore bypassing the US Congress, and speeding up the process.
In his blueprint for the future of financial regulation in the US, launched in late March, Mr Paulson said the Fed should be a market stability regulator, but not supervise individual banks.
In his speech, he also predicted that the government-backed rescue of Bear Stearns was unlikely to be the last. "Whether it was Long-Term Capital Management [hedge fund] in 1998 or Bear Stearns this year, our nation has come to expect the Federal Reserve to step in to avert events that pose unacceptable systemic risk."
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