By Ian McKendry

WASHINGTON (MNI) – Amid a climate of extraordinary policy actions
and economic turbulence it is important the Federal Reserve remains
“insulated” from the politics of the moment and focuses on its tasks of
price stability, employment and regulation, Federal Reserve Governor
Daniel Tarullo said Friday.

“The idea essentially is, that the central bankers should be
insulated from the politics of the moment,” Tarullo said while answering
a question Friday at the George Washington law school in Washington,
D.C. after a speech.

“I think it is important to say it is the politics of the moment
from which they should be insulated, not from basic policy decisions by
the Congress,” Tarullo added.

Tarullo said by insulating the Federal Reserve from the politics of
the moment it is better able to focus on the dual mandate of maintaining
price stability and maximizing employment that it has been prescribed by
Congress.

“We are accountable to the American people through the Congress for
implementing the laws which Congress has passed,” Tarullo said.

Tarullo also said as the Federal Reserve’s role has expanded since
the onset of the crisis some duties have been removed with the
implementation of the Dodd-Frank Act.

One of those duties is for consumer financial protection which is
now headed by the Consumer Financial Protection Bureau, and even though
it is lodged within the Federal Reserve, it “acts autonomously,” he
said.

Tarullo said Federal Reserve decisions are often controversial and
it may be better to have some of the controversy that comes with
consumer protection decisions to be taken by the Consumer Financial
Protection Bureau rather than by the Fed, allowing the Fed to focus on
its core regulatory functions.

On the role of the Financial Stability Oversight Council for which
Tarullo is a point man, he said the council will bring together
regulators and allow sharing of information and analysis.

“Financial Stability Oversight has been created to try to play a
role which is in large part but not exclusively, one of information
aggregation analysis, sharing analysis, testing, and in some instances
of course, (to) regulate,” Tarullo said.

“The FSOC has relatively few direct rulemaking tasks. What it’s
most designed to do is to bring together the relevant entities and see
whether people have different perspectives,” he added.

Even though the Financial Stability Oversight Council has only had
one meeting, Tarullo said, “what we have seen so far has been quite
encouraging.”

** Market News International Washington Bureau: 202-371-2121 **

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