WASHINGTON — Though Barack Obama pointed to the Gramm-Leach-Bliley Act of 1999 during his presidential campaign as a source of the financial crisis, his administration's proposal for regulatory reform would expand a key part of the law that gave the Federal Reserve Board "umbrella supervisory" powers.
The plan would remove restrictions that prevent the central bank from examining, requiring reports from or forcing higher capital at the subsidiaries of the largest firms.
While the Obama administration argues those provisions prevented the Fed from properly using umbrella supervision, others argue the central bank was never truly hampered and did not use what power it had.
"The Fed blew it," said Cornelius Hurley, a former Fed lawyer who is now the director of the Morin Center for Banking and Financial Law at the Boston University School of Law. "When it comes to being an umbrella regulator, I don't think the Fed ever exercised that role truly. I don't think the Fed ever took that role seriously. It could have been more vigilant as to what ultimate effects financial engineering was having on institutions outside its purview."..cont'd
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