LOUIS (Reuters) – Greece could exit the euro zone without doing deep damage to the U.S. and European economies if the transition is handled properly, a top Federal Reserve official said on Wednesday.

Concerns about a Greek exit have kept global financial markets under pressure in recent days.

“I’m one that thinks that Greece could exit, and it could be handled in an appropriate way without causing too much damage, either in Europe or in the U.S.,” St. Louis Federal Reserve Bank President James Bullard told Reuters.

Bullard said he believes the European Central Bank is committed to backing the continent’s brittle banking system, and therefore the risks to the U.S. economy are smaller than some analysts perceive.

Indeed, Bullard added he expects the U.S. economy to perform better than many forecasters anticipate and that the Fed will therefore need to raise interest rates in late 2013, not late 2014 as its policy committee is currently indicating.

Bullard is not currently a member of the Fed’s rate-setting policy committee but will be next year.

He said the Fed does have additional ammunition if needed – for instance, in case the U.S. economy stumbles.

WASHINGTON, May 22 (Reuters) – Three U.S. senators on Tuesday proposed legislation barring bankers from serving on the boards of the Federal Reserve’s 12 regional banks, saying the practice poses dangerous conflicts of interest that are highlighted by the recent trading loss of JPMorgan Chase & Co.

Jamie Dimon, the chief executive of JPMorgan, is a board member of the Federal Reserve Bank of New York, which regulates his bank, a clear example of “the fox guarding the hen house,” Senator Bernie Sanders, an independent, said at a news conference.

“Allowing banking industry executives to serve on the Fed’s boards and hand-pick its members and staff is a clear conflict of interest that must be eliminated,” said Sanders, who proposed the legislation along with Senators Barbara Boxer and Mark Begich, both Democrats.

It is unclear whether the legislation will gain any traction in the Senate, and aides said they were unaware of any companion bill currently in the House of Representatives.

The measure would prevent any bankers from serving on the boards of the regional Fed banks. Each board selects the president for its bank.

“With the recent … fiasco at JPMorgan, we’re now again taking another look at this whole circumstance,” Boxer said at a news conference with Sanders.

JPMorgan shocked financial markets on May 10 by disclosing it suffered a trading loss of at least $2 billion from a failed risk-hedging strategy. The losses dented Dimon’s reputation as a savvy banker and dealt a major blow to efforts by banks to defang financial oversight rules put in place in the wake of the 2007-2009 financial crisis.

LOUISVILLE, Ky (Reuters) – The Federal Reserve, which has taken already taken extraordinary steps in the past couple of years to provide greater transparency, is considering a range of ways to sharpen its communication on the possible future course of monetary policy.

Some officials are advocating fuller and more frequent monetary policy reports that, ideally, would provide financial markets greater clarity about how the Fed would adjust its policy to changing economic circumstances, and give some sense about probability.

The goal would be fewer misunderstandings or surprises about Fed policy, less volatility in markets and more confidence in long-range planning.

The Fed in recent years engineered communication enhancements to both shed its image as a secretive institution deliberating behind closed doors and improve the effectiveness of monetary policy.

Publishing a quarterly report “could potentially provide a more fulsome discussion of the outlook for the U.S. economy and for policy,” James Bullard, president of the St. Louis Federal Reserve Bank, said on Wednesday.

Minutes of Fed meetings in March and April show policymakers considering a range of expanded communications options, with no decisions taken.

A source familiar with the Fed’s deliberations said officials were mulling the possibility of quarterly monetary policy reports. The Fed currently delivers reports to Congress twice a year on the policy and economic outlook.

NEW YORK/WASHINGTON, May 14 (Reuters) – NEW YORK/WASHINGTON

(Reuters) – JPMorgan’s $2 billion-plus trading loss raises serious questions about whether the New York Federal Reserve and other regulators were asleep at the wheel or whether it is asking too much of them to keep up with the financial engineering conducted by complex institutions with diverse, global operations.

The discussion may have migrated from too big to fail to too big to manage and too big to regulate.

Though the Fed – JPMorgan’s primary regulator – is not supposed to prevent banks from losing money, and JPMorgan remains stable, the shock loss rattled confidence in the financial sector.

It also raises questions about how attuned regulators were to the botched derivatives trade.

The Fed ramped up the number of staff embedded at JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) since the financial crisis, when the bank grew through its takeovers of much of the failed Bear Stearns and Washington Mutual. But so far it is unclear whether any of these regulators detected something high-risk and untoward going on in JPMorgan’s Chief Investment Office in New York or in London.

The Fed has declined to comment on when it knew there was a problem or whether it played any role in alerting the bank. It will likely take some time to sort things out.

NEW YORK/WASHINGTON (Reuters) – NEW YORK/WASHINGTON (Reuters) – JPMorgan’s $2 billion-plus trading loss raises serious questions about whether the New York Federal Reserve and other regulators were asleep at the wheel or whether it is asking too much of them to keep up with the financial engineering conducted by complex institutions with diverse, global operations.

The discussion may have migrated from too big to fail to too big to manage and too big to regulate.

Though the Fed – JPMorgan’s primary regulator – is not supposed to prevent banks from losing money, and JPMorgan remains stable, the shock loss rattled confidence in the financial sector.

It also raises questions about how attuned regulators were to the botched derivatives trade.

The Fed ramped up the number of staff embedded at JPMorgan Chase & Co since the financial crisis, when the bank grew through its takeovers of much of the failed Bear Stearns and Washington Mutual. But so far it is unclear whether any of these regulators detected something high-risk and untoward going on in JPMorgan’s Chief Investment Office in New York or in London.

The Fed has declined to comment on when it knew there was a problem or whether it played any role in alerting the bank. It will likely take some time to sort things out.

The U.S. central bank certainly cannot say it wasn’t told that there were huge positions being built up by JPMorgan. Reports by the Wall Street Journal and Bloomberg in early April let everyone know that a JPMorgan trader, dubbed the “London Whale,” was playing a dominant role in certain markets.

WASHINGTON (Reuters) – The United States posted a budget surplus for the first time in 42 months in April on a rise in tax receipts and a drop in government spending, although it partly reflected a shifting of some payments to other months.

The government notched a larger-than-expected $59.12 billion surplus last month, compared with a $40.39 billion deficit in April 2011, the Treasury Department said on Thursday. The last time the government logged a surplus in any month was September 2008, when the worst of the financial crisis began to rock Wall Street.

Analysts surveyed by Reuters had forecast a $30 billion surplus for April, although the nonpartisan Congressional Budget Office said on Monday it expected a surplus of $58 billion.

While the one-month surplus does not signal a turnaround in U.S. indebtedness – the nation is still projected to run a fourth straight year of deficits topping $1 trillion – it could be taken as a modest reflection of a slowly improving economy.

However, the budget gap is so large, Congress and the administration cannot side-step the need for action if they are to put a significant dent in it, said Cooper Hawes, an analyst for Barclays Capital.

“While the report is encouraging, the deficit is still large by historical standards and will likely eventually require significant fiscal adjustments,” Hawes said.

Treasury Department officials noted that the size of the surplus was amplified by calendar peculiarities that resulted in lower tax refunds or moved some benefit payments into March.

WASHINGTON, May 8 (Reuters) – The Swiss National Bank’s cap on the strong franc is appropriate given slow growth and deflation risks, but authorities should return to a floating exchange rate when growth and inflation stabilize, the International Monetary Fund said on Tuesday.

Timing the end of the cap, which the Swiss National Bank put in place as safe-haven flows drove up the value of the currency, hurting the export-heavy Alpine economy, will be tricky, the fund said in a routine review.

The IMF also urged Swiss authorities to exit the arrangement “with great care.”

While Switzerland’s economic fundamentals and policies are strong, the fund said that the country faces risks from the euro zone debt crisis as well as vulnerabilities in its domestic financial sector.

While Swiss banks meet regulatory capital requirements, large banks have “a relatively thin layer” of high-quality capital, the fund said.

Internally, loose monetary policy may be fueling a mortgage credit and real estate bubble, the IMF warned. That bubble puts domestically-oriented banks and insurers at risk, the fund added.

The IMF said regulatory measures, rather than monetary policy tightening, would be the best way to address real-estate bubble worries.

WASHINGTON (Reuters) – President Barack Obama’s two nominees to the Federal Reserve appear likely to fall victim to a long-running political feud, which would leave the central bank short-handed as it struggles with tough regulatory and monetary policy questions.

Republican Senator David Vitter has demanded that the Senate hold a debate before any vote on the nominees, which would require Democratic leaders to muster a super majority to move forward – a hurdle that may be too high to clear.

As a result, the Senate may end up abandoning the nominees, Harvard economist Jeremy Stein and investment banker Jerome Powell, and leave a decision on filling out the normally seven-member Fed board until after this year’s presidential election.

“I refuse to provide Chairman Bernanke with two more rubber stamps who approve of the Fed’s activist policies,” Vitter said when asked if he planned to lift his hold on the nominations.

Leaving the central bank short-staffed deprives it of top-notch monetary policy and financial market expertise that could prove valuable given the stop-and-go nature of the U.S. recovery and economic threats coming from Europe.

It could also undermine the institution’s efforts to get up to speed on regulatory matters now that Congress has vastly expanded its responsibilities for ensuring financial stability.

“The demands on the Fed right now are intense,” said Nathan Sheets, an economist for Citigroup and the former director of the Fed’s division of international finance. “Leaving talented nominees on the sidelines – when there is so much scope for them to contribute – increases the stresses on the Fed and makes these demands even heavier than they would otherwise be.”

WASHINGTON (Reuters) – The Treasury Department said on Friday it plans a third sale of the common stock of American International Group (AIG.N: Quote, Profile, Research, Stock Buzz) that it acquired as part of the government bailout of the insurer in 2008, at the height of the financial crisis.

The Treasury said the size and price of the offering are to be determined. Buyers purchased $6 billion of AIG common stock in March and $5.8 billion worth in May 2011.

AIG has said it intends to buy up to $2 billion of the stock sold in the offering, the Treasury Department said in a statement. AIG bought around $3 billion worth of stock in the March sale, a Treasury official said.

The Treasury and the Federal Reserve made $182 billion available to prop up the company, which couldn’t meet its credit insurance obligations when housing markets crashed. U.S. authorities retain approximately $44 billion of that investment, a Treasury official said.

The AIG rescue was the largest U.S. government bailout of a private company in history.

Bank of America Merrill Lynch (BAC.N: Quote, Profile, Research, Stock Buzz) , Citigroup (C.N: Quote, Profile, Research, Stock Buzz), Credit Suisse, Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz), Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz), J.P. Morgan (JPM.N: Quote, Profile, Research, Stock Buzz) and Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) have been hired as bookrunners for the offering, Treasury said.

Treasury said last month it expects that many of the financial crisis programs it and other banking authorities implemented will end up making a profit for taxpayers.