The Federal Reserve may be about to lose the means by which it rescued firms during the financial crisis, such as it did for American International Group (AIG) and Bear Stearns in 2008. New rules are being finanised that remove some of its emergency lending authority. This move is the result of the 2010 Dodd-Frank law which limited the Federal Reserve's ability to "prop-up" banks. In a speech on Wednesday, Mr Bernanke, who has been criticised over his handling of AIG, said he would not allow banks to use their own capital to prop up failing firms.
The Federal Reserve may be about to lose the means by which it rescued firms during the financial crisis, such as it did for American International Group (AIG) and Bear Stearns in 2008. New rules are being finanised that remove some of its emergency lending authority. This move is the result of the 2010 Dodd-Frank law which limited the Federal Reserve's ability to "prop-up" banks. The new rules have caused heated discussion in Congress, with some against the idea that the Fed should relinquish its role, regarding emergency lending powers as a critical part of its structure.