Fed's Moves to Improve Image Face Skepticism

The Federal Reserve's recent decisions to enhance consumer protection regulation and crack down on industry compensation practices do not appear to be assuaging critics in Congress. In the past two weeks, the Fed announced it would begin supervising nonbank subsidiaries of bank holding companies for compliance with consumer protection rules. That move was followed by word that the central bank is crafting a proposal designed to restrict inappropriate executive compensation practices at financial institutions. Those steps come as the prospect of the Fed becoming the systemic risk regulator look increasingly bleak. Though the Fed makes no mention of Congress when discussing its latest actions, observers say its proposals are being developed with one place in mind — Capitol Hill. "They're talking to the Hill," said Gil Schwartz, a former Fed lawyer who is now in private practice. "They're saying the Fed is engaged and they should be anointed with the mantel of the systemic regulator."