WASHINGTON, DC - The US Federal Reserve and the Treasury have released a joint statement clarifying their respective roles in maintaining financial stability. In it the Fed states that "it alone is responsible for maintaining monetary stability".
The Fed - the US central bank - played a key role in organising the investment bank shotgun wedding of Bear Stearns to JP Morgan in April 2008, followed by that of Merrill Lynch to Bank of America in September 2008. Both rescues were organised to keep financial stability by saving Bear and Merrill from the brink of collapse.
The Treasury and Fed would be at the core of a US regulatory reform package, touted by many as a necessary response to oversight failings in the current crisis. The Treasury published a blueprint for reform in March 2008, calling for a simplified system to replace the current patchwork of supervisors, and has since granted the Fed additional emergency powers during the crisis. Treasury secretary Tim Geithner repeated calls for US regulatory overhaul at a meeting of G-20 finance ministers on March 14.
The future role of the Securities and Exchange Commission (SEC) remains in question. The SEC could be the third pillar of a regulatory reformation but has been seen to drop the ball by failing to detect two major financial scams since December - Bernard Madoff's $50 billion Ponzi scheme and the alleged Stanford fraud.
The joint release can be read here.