FDIC's Bair Pans Super-Regulator Plan
NEW YORK (
) -- Federal Deposit Insurance Corp. Chairwoman Sheila Bair has been vocal about her differences with other regulators over regulatory reform, and now she is taking on the lawmakers who will make that reform a reality.
In a
New York Times
op-ed on Tuesday, Bair outlines her argument against consolidating the four big banking regulators into a single agency.
Such a plan has been advocated by a variety of legislators, including Senate Banking Committee Chairman Christopher Dodd (D., Conn.), who said last month that not creating one powerful overarching regulator after previous crises has had some "real costs." For instance, large financial firms have availed themselves of loop holes between regulators -- as in the case of derivatives -- or gone "regulator shopping" to choose the most agreeable agency.
Critics have said the major rescues of large, interconnected firms like American International Group and Citigroup were caused in part by this trend.
The Obama administration's regulatory overhaul plan would incorporate the Office of the Comptroller of the Currency and the Office of Thrift Supervision -- which has a reputation of regulatory idiocy after its handling of
-- into one national bank supervisor. The FDIC would then handle state-chartered banks and the
Federal Reserve
would act as a broader referee of sorts, overseeing the largest institutions and monitoring systemic risk. A separate consumer-protection agency would also be created.
In her editorial, Bair said she supports "key pillars" of the plan, like the national bank regulator and consumer agency, but thinks lawmakers who advocate just one, central regulator are taking it too far. She blamed the financial crisis on banks taking advantage of regulatory loopholes and using exotic financial products that also fell between the cracks.
"The creation of a single regulator for all federal- and state-chartered banks would not address these problems," says Bair. "Rather, it would endanger a thriving, 150-year-old banking system that has separate charters for federal and state banks."
Concentrating power into one entity would help the "too-big-to-fail" banks -- like
Bank of America
(BAC) - Get Report
,
JPMorgan Chase
(JPM) - Get Report
,
Citigroup
(C) - Get Report
,
Wells Fargo
(WFC) - Get Report
,
Goldman Sachs
(GS) - Get Report
and
Morgan Stanley
(MS) - Get Report
-- but not community banks throughout the country that provide funding for small, rural communities, Bair said. She added that an assortment of regulators "permits diverse viewpoints" -- a concept she is all too familiar with.
Bair has had a territorial streak when supporting various parts of the Obama plan, vocally airing her differences in press interviews rather than settling them in private, as the administration would prefer. She does not support expanding the Fed's authority to regulate the biggest banks, or giving the consumer agency examination and enforcement powers -- both moves that would step on the FDIC's toes.
Bair has butted heads with various regulators and advisers, including Treasury Secretary Tim Geithner, and told
The Associated Press
last month that "there's a lot of resistance from a lot of different quarters to a lot of the things the administration has submitted," adding, "That is a reality the administration needs to deal with."
Bair, a holdover from the Bush administration, is in the midst of a five-year term that expires in June 2010.
-- Written by Lauren Tara LaCapra in New York
.
