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The Federal Reserve would continue to oversee smaller banks around the country under a measure adopted Wednesday in the Senate, marking a major victory for the Fed as lawmakers prepare to overhaul the nation's financial regulations. This Story * More restrictions on bank investments are debated * Fed holds on to small banks in Senate bill Under the bill originally introduced by Sen. Christopher J. Dodd (D-Conn.), the central bank would have been stripped of the ability to regulate all but the handful of banks that hold assets above $50 billion. The Fed's leaders had vehemently opposed that proposal, saying it would undermine the central bank's effectiveness. Lawmakers agreed on Wednesday, passing 91 to 8 an amendment to keep the Fed as the primary supervisor of the thousands of smaller banks across the country. “This amendment ensures that the nation's monetary policy is connected to Main Street and not just to Wall Street,” said Sen. Amy Klobuchar (D-Minn.). The vote followed a vigorous campaign by Fed leaders — especially the heads of regional Fed banks, who would have lost most of their regulatory authority. They argued that their oversight of smaller banks provides them a better window into the internal functioning of the economy, noting that those banks have contributed to big economic problems in the past, such as in the 1930s and during the savings and loan crisis of the 1980s. Proponents of shifting that oversight away from the Fed noted that the central bank regulators had made significant mistakes over the past decade, failing to rein in bad lending practices that contributed to the recent crisis. On Wednesday, banking industry representatives quickly praised the vote. “Preserving Fed supervision over smaller institutions means preserving its access to timely information about the flow of credit to small businesses and in communities of all sizes across the country,” Edward L. Yingling, president of the American Bankers Association, said in a statement. “Community banks are vital to the economic health of the nation and issues that impact these banks and their communities should be a major factor in the Fed's decision making process.” See more at the link: http://www.washingtonpost.com/wp-dyn/content/article/2010/05/12/AR2010051202873…. added by: NotHippie