WASHINGTON--Federal regulators lack the power to deal appropriately with insurers and other non-banking institutions that get into the kind of financial trouble that can pose grave risks to the entire economy, and legislation is needed to fix this, the Federal Reserve Board chairman said.
Speaking during his semi-annual monetary policy report to Congress on Tuesday, Federal Reserve Board Chairman Ben Bernanke said the problems with American International Group demonstrated that federal regulators lack the authority to take appropriate action when needed against non-banking institutions.
"One of the big problems is that if we wanted to close down a major institution, we don't have the legal authorities and the framework to do it," he said.
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