Rep. Frank calls for US financial risk regulator

By Svea Herbst-Bayliss and John Poirier

BOSTON/WASHINGTON (Reuters) - The U.S. Federal Reserve or another new agency should be given the power to monitor all risk in the financial system and act when necessary, a powerful Democratic lawmaker said on Thursday.

"Congress should seriously consider establishing or empowering the Federal Reserve to act as a 'Financial Services Risk Regulator,"' Rep. Barney Frank told the Boston Chamber of Commerce in a wide-ranging speech on ways the government could help keep lenders from getting into trouble so severe that it could unhinge the financial system.

That regulator would be able to "assess risk across financial markets regardless of corporate form and to intervene when appropriate," Frank said days after Bear Stearns BSC.N., once Wall Street's fifth biggest investment bank, nearly collapsed in the wake of soured housing market bets.

"To the extent that anybody is creating credit they ought to be subject to the same type of prudential supervision that now applies only to banks," Frank, chairman of the Financial Services Committee, said.

A Fed official said the U.S. central bank had no immediate comment on Frank's proposal.

The plan will take months to implement, Frank said, acknowledging the government must first help Americans at risk of losing their homes to foreclosure.

"The chances of this being done right under President Bush are minimal," the Massachusetts Democrat said. "We will start looking at it seriously this year but this is not the thing you do in presidential election year."

White House spokeswoman Dana Perino said she was unaware of Frank's plan. "He's got several different ideas out there. We'll take a look at them," she said.