NACBA
05-18-2015, 08:31 AM
Former Federal Reserve Chairman Ben Bernanke on Friday decried recently proposed legislation that would limit the U.S. central bank's lending authority during a financial crisis, adding to the recent criticism of the bill's sponsor, Sen. Elizabeth Warren (D-Mass.), who co-authored the Act, CNBC.com reported on Friday. The Bailout Prevention Act — a bipartisan bill introduced Wednesday — would seek to curb risk-taking by large banks by removing some of the Fed's ability to bail them out. In a blog post, Bernanke contended that the measure would "imprudently limit the Fed's ability to protect the economy" and prevent contagion from a firm’s failure. During the 2007-09 financial crisis — when Bernanke served as Fed chair — the central bank made loans to Bear Stearns and AIG with "reluctance" to prevent further panic, he said. "This lending, all of which was repaid with interest, was essential for stabilizing the financial system and restoring the flow of credit," Bernanke wrote. However, vocal Wall Street critic Sen. Warren contended that the Fed's presence as a safety net could lead large banks to act carelessly.