Bernanke makes case for strong Fed supervision of banks, need to remain above politics

NEW YORK (AP) - The chairman of the Federal Reserve is concerned that congressional efforts at financial reform could weaken the central bank's ability to handle future crises and may politicize monetary policy.

Fed Chairman Ben S. Bernanke made the comments in an Op-Ed piece to appear in today's Washington Post, five days before the Senate Banking committee holds a hearing on his nomination for a second term. His current four-year term expires Jan. 31.

Bernanke wrote the nation is challenged to design a financial oversight system that will "embody the lessons of the past two years and provide a robust framework for preventing future crises and the economic damage they cause."

But two proposals being considered "are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States," he said.

The first item in question is a bill before the Senate that would strip the Fed of its bank regulation authority and give the Senate a role in selecting the 12 regional Federal Reserve bank presidents, proposed by Banking Committee Chairman Chris Dodd, D-Conn.