Federal Reserve (Fed) Chairman Ben Bernanke on Thursday reiterated his opposition to Senate efforts to strip the Fed's supervision of U.S. banks. Bernanke, in a letter to Congress, argued that stripping the U.S. central bank of such power would deprive the Fed of information that factors into the setting of interest rates to influence overall economic activity. “Elimination of the Federal Reserve's role in supervision would severely undermine the Federal Reserve's ability to obtain in a timely way and to evaluate the information it needs to conduct its central-banking functions effectively,” the Fed chairman wrote. During the financial crisis, information from banking supervisors helped Fed officials better understand the severity of credit problems, leading them to reduce interest rates more quickly and aggressively, Bernanke said. Information on the health of banks will factor into Fed decisions about when to start increasing interest rates and ending other stimulus to prevent inflation from soaring, the Fed chief said.
