Rep. Frank says Fed's emergency power a concern

House Financial Services Committee Chairman Rep. Barney Frank speaks at the Office of Thrift Supervision National Housing Forum in Washington, December 8, 2008.

WASHINGTON (Reuters) - An influential lawmaker on Thursday expressed concern about the Federal Reserve's emergency powers and said they should be curtailed when the current financial crisis ebbs.

"One of the concerns we have now is the 13/3 authority," House Financial Services Chairman Barney Frank told reporters after a hearing.

Frank, a Massachusetts Democrat, was referring to the legal provision that the Fed has invoked in taking unprecedented steps since 2007 to support the crumbling financial system and pull the economy out of a deepening recession.

"I think it does have to be limited at some point, although not in the middle of the crisis," Frank said.

The Fed, normally focused on keeping harmful inflation at bay and supporting sustainable economic growth, has during the crisis extended loans to investment banks and other firms usually outside its reach and has stepped in to prop up failing institutions, including investment bank Bear Stearns and insurer American International Group Inc.

Lawmakers have in recent weeks been sharply critical of the AIG bailout, particularly after revelations of bonuses paid to executives of the firm.

On a separate matter, Frank was lukewarm to the possibility of the Fed issuing its own debt to help it manage its expanding balance sheet, particularly if the Fed took on the job of ensuring stability across the entire financial system.

"One of the concerns about the Fed (issuing bills) is do you want the regulator also being the funder? That could be problematic. And so that's still an open question," he said.

(Reporting by Patrick Rucker, writing by Mark Felsenthal, editing by Gerald E. McCormick)