“Or otherwise poses a threat to the financial stability of the United States”

        The title of this post comes from Title I, Subsection C in the "Dodd-Frank Wall Street Reform and Consumer Protection Act" and grants the Board of Governors of the Federal Reserve the power to act upon the frivolous whims that compel them to do anything that makes marginal fiscal sense. Title 1 or the “Financial Stability Act” grants the Fed the power to “recommend” action to the appropriate regulatory agency if they should a bank is in violation of Dodd-Frank or otherwise threatens the stability of the country. If the agency fails to take the prescribed action against the institution, the Fed can then carry out the course of action. It would be reasonable to give the Fed such authority but neither the term “threat” nor “financial stability” adequately defined leaving it is up to their historically sound-ish judgement to define these threats.

         This is not the only place, which extends power to the Fed. Peppered through the entire Act are provisions, which greatly increase their regulatory authority. Financial institutions, for example, with assets totaling more than $50 billion must request permission from the Fed if they want to acquire any shares of a financial institution with assets totaling $10 billion. (Sec. 163, (b)(1)). 

But it is "Title 11: The Federal Reserve System Provisions" which gives our six current cowboys their big guns, requiring them to draft various regulations on lending and the liquidation of the institutions they supervise. Such regulations may include capital requirements, a resolution plan, restrictions on short-term debt, and anything else the Fed deems necessary.  The law does provide a powerful check, limiting the Fed’s authority by requiring them to gain approval for their new regulations from the Secretary of the Treasury but it gives them a long rein to draft such regulations. The Fed is to be kept so busy by this new act that it calls for the creation of a new position, the “Vice Chairman of Supervision” to help carry out these functions.

          Giving the Federal Reserve a long leash in regulatory reform makes political sense. With Christopher Dodd set to retire this year and the risk of Barney Frank losing his seat as the chair of the House Financial Services Committee high at the time of drafting  the legislation, it made sense to remove power from Congress, subject to party changes and the whim of voter and place it in the hands of a body which is appointed, not elected. This is not entirely problematic. With a divided Congress, the potential for increased division in subsequent election years and the slow pace at which they are able to influence action, there is the need for an organization which can decisively take action in a financial emergency and is not subject to party politics. Yet, this isn’t China. The United States is built on democracy and it’s economic brother, capitalism. We don’t just hand over blanket authority to governing bodies, particularly ones who have not been democratically elected and it is more onerous to do so when encroaching on the free market. If we are to do so, the terms need to be painstakingly outlined, which overall 2,300 pages of legislation fail to accomplish. Sure, the current Board is probably to busy with their destruction of U.S. diplomacy to institute draconian measures against our banking system. But one never knows.