Bernanke to defend Fed role on smaller bank supervision

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Federal Reserve Chairman Ben Bernanke will defend the central bank's supervision of smaller banks in a hearing before the House Financial Services Committee on Wednesday, the Wall Street Journal said.

Bernanke is set to take on a piece of the Senate regulatory overhaul bill that would strip the Fed of smaller banks supervision, the Journal, said citing the chairman's prepared remarks for the House Financial Services Committee.

"The insights provided by our role in supervising a range of banks, including community banks, significantly increase our effectiveness in making monetary policy and fostering financial stability," the paper quoted Bernanke's prepared remarks.

Senator Christopher Dodd unveiled revised legislation on Monday which would give the Fed more power than in his earlier proposals, putting the central bank in charge of overseeing banks and important financial firms with assets greater than USD 50 billion.

However, the measure would pull the Fed out of supervision of roughly 7,000 smaller banking firms, handing that responsibility to the FDIC and the OCC.

Former Fed Chairman Paul Volcker, who will appear along with Bernanke at Wednesday's hearing, will also take up the Fed's case to oversee smaller banks, the Journal said.

"The Fed's regional roots would be weaker and a useful source of information lost," the paper quoted Volcker's prepared remarks.

The Federal Reserve could not be immediately reached for comment by Reuters outside regular US business hours.