Treasury May Oversee Systemic Risk

Under various proposals being weighed in Congress, the Treasury could end up overseeing systemic risk, deciding when the government exercises unprecedented resolution powers over giant companies and gaining veto power over what is now the Fed's free hand to aid failing firms. Some observers say giving the administration such a direct role in overseeing the financial markets would inject a more political calculation into the regulatory process. But others said a higher regulatory profile makes sense for the Treasury, noting the department is already at the center of making economic policy, and might be less prone than other regulators to get too close to institutions and could end up being more accountable for the smooth functioning of financial markets. "Treasury was always going to have authority when things blow up because ultimately you are going to need the backing of the taxpayer," said Douglas Elliot, a fellow at the Brookings Institution.