By Rachelle Younglai and Kristina Cooke
WASHINGTON/PHILADELPHIA, May 12 (Reuters) – The shaping of the U.S. financial reform bill has given a new meaning to the old market adage “Don’t Fight the Fed.”
Five months ago, many lawmakers wanted to confine the U.S. central bank to setting monetary policy and acting as a lender of last resort for banks.
Blaming the Fed for missing the warning signs in the run-up to the financial crisis, senators were preparing to step up their scrutiny of the central bank and strip its authority to examine and supervise all banks.
But fierce lobbying by regional Fed bank chiefs and hundreds of small commercial banks scattered across the country persuaded Congress otherwise.
In a lopsided 90-9 vote on Wednesday, senators approved an amendment to a regulatory reform bill that would preserve the Fed’s power over small state-chartered banks instead of moving them to another banking regulator.