Greenspan Raps Plan to Change Regulatory Role

Federal Reserve Board Chairman Alan Greenspan said Tuesday that the Bush Administration’s plan to reorder the regulatory bureaucracy would seriously damage the central bank’s ability to steer the economy in troubled times.

The plan would end the Federal Reserve’s role as regulator of large national bank holding companies, confining it to supervising state-chartered banks, which are generally smaller and less crucial as individual institutions to the nation’s economic system.

But Greenspan warned that would hamper his agency’s understanding of such economic problems as the credit crunch, diminish its influence over interest rates and the economy and interfere with its ability to serve as a lender of last resort during banking emergencies.

“Our ability to accomplish our monetary policy objective successfully would be seriously damaged without the intimate contacts derived from our supervisory responsibilities relating to large banking organizations,” he said.