In an early-morning visit to Capitol Hill Thursday, Federal Reserve Chairman Ben Bernanke recommended that Congress adopt several major policies to beef up regulation of the financial system. But internal documents from the committee’s Republican minority derided Bernanke’s proposals, saying they “perpetuate the bailout regime” and enjoy “virtually no support.” Bernanke’s recommendations, offered in remarks to the House Financial Services Committee, largely echoed the Obama administration’s proposals for robust regulation to prevent future systemic failures like the ones that led to the current U.S. recession. Those plans include broader powers for the Fed; aid to all regulatory agencies to police banks’ levels of leverage and risk exposure; and a chief council of super-regulators to scrutinize “too big to fail” firms. “Legislative change is needed to ensure that systemically important financial firms are subject to effective consolidated supervision, whether or not the firm owns a bank,” Bernanke said in his prepared remarks. “All federal financial supervisors and regulators – not just the Federal Reserve – should be directed and empowered to take account of risks to the broader financial system.” Yet despite broad agreement that the economy’s downturn has exacted a high toll on Americans, a bruising fight in Congress appears imminent over the planned regulations. The Finance Committee’s Republican members asked Bernanke some tough questions about his proposals, but an internal memorandum sent to the minority Congressmen by their staff suggests they may reject the Fed’s and administration’s ideas. In the document, GOP members were encouraged to criticize a number of Bernanke’s specific proposals.

“The administration’s proposal to vest systemic risk regulatory authority in the Federal Reserve has virtually no support,” the memo said. It encouraged the Congressmen to criticize the agency’s role in the financial crisis and ask Bernanke, “With this kind of track record, why exactly should we reward you with more turf and more resources and more responsibility?” The minority also appeared poised to reject the establishment of a “resolution authority” to unwind failed companies and their distressed assets. Their memo suggested telling Bernanke that the proposed authority “seems awfully long on carrots and awfully short on sticks,” and to complain that it would “force losses” on taxpayers. By contrast, the party that held the presidency, Senate, and House for most of the decade concluded in its internal memo that “the Republican approach ensures the return of market discipline, which will result in a safer and more stable financial system.” As the committee considers various proposals for inclusion in an eventual bill, the chairman, Rep. Barney Frank (D.-Massachusetts), insisted markets would soon be regulated more closely. “The fact is there is real political will for change,” Frank said in September. “And there is going to be change.”