Chairman of the US Federal Reserve, Ben Bernanke strongly supported Fed’s power of overseeing the smaller banks as it gives the regulator vital knowledge in deciding the monetary policy.

Bernanke said this on Wednesday in his testimony before the House of Representatives Financial Services Committee arguing against plans to revoke Fed’s powers to oversee smaller US banks.  

"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," Bernanke reasoned.

Earlier, in November last year, Senate Banking Committee Chairman Christopher Rodd had called for stripping the Fed off its powers to oversee smaller banks. Rodd tagged the Fed’s performance as ‘abysmal failure’.

Erstwhile Fed Chief and present economic advisor to the White House Paul Volcker also took up the regulators case to oversee smaller banks in the same hearing. If deprived of the power, Fed would be pulled out from its job to supervise over 5,000 smaller banks.

The new regulation limits Fed’s powers to supervise only those financial firms and banks, which have assets over $50 billion.