Lawmakers determined to curb Fed's power

Los Angeles/Washington: The US Federal Reserve has dramatically expanded its role in the economy over the last 18 months, and the Obama administration has proposed enhancing that authority as part of an overhaul of financial regulations.

But many members of Congress - Democrats and Republicans - are seeking to curtail the central bank's authority instead of expand it.

Worried about the increased power of the complex and mysterious Fed, and upset it did not do more to prevent the deep recession, Capitol Hill has focused its anger over the financial crisis and its aftermath on the central bank.

The Fed finds itself at the centre of a collision of traditional political concerns - conservatives' fears of heavy-handed government intervention in free markets, and liberals' complaints of regulators who favour corporate executives over average Americans.

More than two-thirds of the House of Representatives has signed on to a bill that would subject the central bank to increased congressional oversight through expanded audits. A key senator wants to strip the Fed of its authority to regulate banks. And the chairman of the House Financial Services Committee wants to rein in the Fed's emergency lending power, which it used to help engineer the sale of Bear Stearns and bail out American International Group.

Federal Reserve Chairman Ben S. Bernanke defended the central bank during a congressional hearing on Thursday. He reiterated his belief that the Fed was best suited for taking on the major new role the administration had proposed for it - supervising large financial institutions that pose a risk to the entire economy.

But Bernanke also acknowledged the criticism of the Fed's actions during the financial crisis, saying he shared congressional frustration.

"There's nobody more sick and tired of bailouts than me," Bernanke said.

Still, he is fighting an uphill battle for increased power as Congress works to finish the regulatory overhaul this year.

"There just aren't a lot of cheerleaders here for expanding the authority of the Federal Reserve," said Kirstin Brost, a spokeswoman for the Senate Banking Committee.