Fed's Broader Portfolio Raises Some Worries

Central bank appears deft so far, but crisis could stretch it thinner
By Kevin Spak,  Newser Staff
Posted Jul 17, 2008 12:18 PM CDT
Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, July 16, 2008, before the House Financial Services Committee hearing on monetary policy and the state of the economy.    (AP Photo/Susan Walsh)
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(Newser) – Ben Bernanke has been busy recently—too busy, in the minds of some. The chairman has expanded the Federal Reserve's role beyond traditional monetary policymaker to being an all-purpose protector of the financial system. Many of his dramatic moves—the Bear Stearns buyout, backstopping Fannie Mae and Freddie Mac—averted disasters, but could undermine the central bank before long, the Washington Post reports.

"If you do more things, you set yourself up to have to choose among them,” a former Fed staffer says. The White House has proposed making the change official, adding financial stability to the Fed’s mandate. But it would need more power, and governors, to execute that function, and also risks losing its cherished political independence.