Economist Philip Jefferson Discusses
Expansion of Fed's Regulatory Role on NewsHour
by Stacey Kutish
Professor of Economics Philip Jefferson, a former research economist at the Federal Reserve Board, joined analysts on PBS' "NewsHour" last night to discuss the possible expansion of the Fed's regulatory role:
"The Fed has traditionally regulated banks. And over time, they've built up an expertise with respect to bank regulation, so that when they go in and look at the books of a bank, they know what to look for, what the red flags are.
"Now, let's think about what would happen if we all of a sudden gave the Fed the power to regulate hedge funds and other financial institutions that they historically have not had the power to regulate. Well, what does it mean, then, to go in and look at a hedge fund's books, given the type of innovative assets that these funds tend to come up with?
"Experts, even working with those firms, didn't understand those assets last fall or when we were extending them. Now, do we all of a sudden think that a Fed or even the SEC, if they were to go into these private firms and look at their books and provide oversight, would actually know what they're seeing and realize what the red flags are?" more