Fed doesn't need independence to stem financial crises: Vice Chairman Fischer

WASHINGTON (MarketWatch) - The U.S. central bank does not need political independence to play an important role in averting future financial crises, Federal Reserve Vice Chairman Stanley Fischer said Wednesday. In fact, elected representatives need to have a say, for instance, if steps were ever needed to pop an incipient bubble in the housing market, Fischer said in a speech prepared for delivery to the National Economists Club in Washington. Popping a housing bubble might mean putting constraints on the loan-to-value ratio or the debt-service-to-income ratio for home borrowers, Fischer said. This "would affect particular sectors of the population" and "political authorities should have some representation in discussing" the measures, Fischer said. The Fed vice chairman said he thought the Fed would be able to retain its independence on interest-rate policy despite "non-independence" with respect to financial stability. Ultimately, the test for the U.S. financial regulatory structure will be how it deals with future potential crises "and may they be few and far between," Fischer said.

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