Fed Has Sufficient Power to Curb Behaviour

The Federal Reserve has plenty of power to follow through on regulatory threats made yesterday to top bank executives aimed at curbing misbehavior on Wall Street, even if it can’t order firms to break up.

“The Fed has a powerful bully pulpit that should not be underestimated,” Mike Mayo, an analyst at CLSA Ltd. in New York, said. “It has the authority to approve or disapprove the ability of banks to return capital to shareholders.”

Mayo and Karen Shaw Petrou, managing partner of Washington-based research firm Financial Analytics Inc., said the Fed also has wide discretion for action under its authority to ensure “safety and soundness” in the financial system.


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