WASHINGTON — Federal Reserve Board Chairman Jerome Powell expressed hope Wednesday that the bank regulators will issue a joint proposal on modernizing the Community Reinvestment Act.
The level of agreement between the Fed, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency on how to update CRA policy has been in question after the OCC last month went out on its own with an advance notice of proposed rulemaking. The ANPR asked for comment on 30 questions about CRA reform, yet the OCC has indicated that further moves on updating the policy will be done jointly.
"Many of the issues we had were reflected in the OCC’s ANPR and we’re hopeful that over time there will be a joint rulemaking with the OCC and the FDIC and the Fed," Powell said at a press conference that accompanied a meeting of the Federal Open Market Committee. "It’s a process and we’re very much interested in pushing forward.”
Now is "an appropriate time to revisit the way we think about CRA," Powell said, "but we don’t want to lose that focus on community and we definitely want to see that fundamental purpose of the law sustained."
Powell was also asked about the 10th anniversary of the financial crisis and the collapse of Lehman Brothers. In his remarks, he sympathized with recent comments by former officials who criticized Congress’ decision — following the crisis — to take away emergency powers that the Fed and other regulators had employed in 2008. Among other reforms, the Dodd-Frank Act restricted the Fed's use of its "13(3)" emergency lending powers.
“I have real doubts about whether it was wise to take away our crisis-fighting tools,” Powell said. “I think you put them away and you hope that you never need them again." He added, "I certainly strongly oppose efforts to take away more of our tools."
His comments echoed those expressed in a New York Times op-ed written by former Fed Chairman Ben Bernanke and former Treasury secretaries Henry Paulson and Timothy Geithner.
“We need to make sure that future generations of financial firefighters have the emergency powers they need to prevent the next fire from becoming a conflagration,” they wrote.
However, Powell said, "I don't think there's any sense that Congress ... would seriously look at changing that."
His comments also echoed a 2015 speech he gave as a Fed governor in which he criticized proposals to restrict the Fed's power beyond the limits set by Dodd-Frank.
“Further restricting or eliminating the Fed's emergency lending authority will not prevent future crises, but it will hinder the Fed's ability to limit the harm from those crises for families and businesses,” he said in the 2015 speech at the Catholic University of America.
Powell’s remarks Wednesday came as the Federal Open Market Committee voted to raise interest rates by 25 basis points, to between 2% and 2.25%. It was the committee’s eighth rate hike since December 2015 and the seventh in the last eight meetings.
The press conference came a week after the White House announced plans to nominate Nellie Liang, a former Federal Reserve economist, to the board. An article in Politico on Tuesday pointed to concerns among Senate Republicans about her appointment. Liang had been involved in crafting some of the Fed's post-crisis regulatory tools for large banks. Some have noted that Liang was an
“In terms of nominations to the Fed, those are entirely and completely under the control of the White House,” Powell said. “Traditionally the Fed chair hasn’t been consulted on those.”
But he added that he is “very happy and excited about the team that we’ve put together.”
