Banks, hedge funds and other financial institutions could find their investment strategies curtailed by the Federal Reserve to reduce the economic risk from asset bubbles, the US Treasury said Tuesday. David Nason, US assistant secretary for financial institutions, said the Fed should use its proposed new powers to force institutions to change their investment strategies if it judged they threatened the wider economy. The powers were outlined in a Treasury blueprint last month, which requires congressional approval and may not even reach the statute book. But regulators see them as a template for future regulation of the financial system.
