Sens. Elizabeth Warren (D-Mass.) and David Vitter (R-La.) are collaborating on legislation to further curb the Federal Reserve’s authority to bail out banks in a crisis, Bloomberg News reported yesterday. They are seeking to define more clearly when a bank is solvent, and thus eligible for funding, limit the length of time a firm can borrow and set penalty rates of interest on emergency loans. The discussions come as Senate Banking Committee Chairman Richard Shelby (R-Ala.) crafts a broader bill on financial regulation. The measure may include trimming the power of the New York Fed, increasing congressional oversight of the central bank and curbing its regulatory authority. The banking committee, which oversees the central bank, is “looking at a number of Fed reform proposals, including facets of the Vitter-Warren approach,” according to Torrie Miller, a spokeswoman for Shelby.
