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Ben Bernanke Is Right

From Greg Robb at Marketwatch:

Bernanke cautiously pushes for new powers for Fed: Federal Reserve chairman Ben Bernanke stuck his toe into the shark-infested waters of Washington regulatory battles and cautiously suggested that the Fed be given new powers to oversee financial markets. In a speech at a FDIC conference, Bernanke said Congress would have to give the Fed new powers if it wanted to give the central bank the job to limit the impact of financial market turmoil on the economy. Bernanke bent over backwards to suggest rather than demand any new powers from Congress. In a major development on another topic, Bernanke said the Fed was considering extending its emergency loans to broker-dealers beyond 2008 to help stabilize the market. The Fed's emergency primary dealer credit facility is now set to expire in mid-September.

If we were back in the late nineteenth century, there would be no question--back then, banks were banks. Anything that promised liquidity, borrowed short, and invested long was a bank. And central banks existed to watch over them.

It's only in our more legalistic age that we have non-banks that aren't shepherded by the central bank...

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