Dodd to Propose Removing Fed, FDIC Supervision
By Susie Madrak Tuesday Nov 10, 2009 1:00pm
Interesting. So Dodd's proposal would effectively remove Sheila Bair's role as one of the few senior administration officials advocating for consumers. (We already know bankers don't like her.) Still, it sounds like a few good ideas here, I'll wait to see how this shakes out.
Nov. 10 (Bloomberg) -- Senator Christopher Dodd will propose creating a single U.S. regulator that would strip the Federal Reserve and Federal Deposit Insurance Corp. of bank-supervision authority, said a person familiar with the matter.
Dodd, chairman of the Senate Banking Committee, would eliminate the Office of the Comptroller of the Currency and the Office of Thrift Supervision and fold the Treasury Department units into the new bank regulator, according to the person, who spoke on condition of anonymity because the plan isn’t public. The Connecticut Democrat is scheduled to release a draft of his financial-regulation overhaul plan today in Washington.
“It makes sense to have one regulator that deals with supervision,” Gilbert Schwartz, a former Fed attorney and a partner at Washington law firm Schwartz & Ballen LLP, said in an interview. “You’ll see a real battle by the Fed and the FDIC to retain their supervisory authority.”
Dodd has faulted the U.S. bank regulation system, saying it encourages charter shopping and a “race to the bottom” by agencies to win oversight roles. His proposal goes further than proposals by President Barack Obama and House Financial Services Committee Chairman Barney Frank to merge the OTS and OCC.
[...] Dodd will also propose creating a Consumer Financial Protection Agency, a council of regulators to monitor large firms for disruptive effects on the industry and the economy, and giving the FDIC power to unwind failed firms whose collapse in bankruptcy could shake the economy, the person said.
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was in place before, and which kind of worked like a charm for 5+ decades.
Ch-ch-changes.....
Heaven forfend! Don't you know it didn't keep up with the changing times? How could consumer banks become investment banks and how could investment banks screw EVERYBODY?
Yes, but it also makes it that much easier to compromise the regulators. The genius of our form of government was the "3 branches of government" that could moderate each other (once upon a time). I suspect regulatory agencies might also benefit from that principal as well.
regulated to the times! Regulation regulation regulation..More for the financial markets not less! We have a failed economic system...It is time for the surgeon to cut out the cancer..reward results over the immediate /annual profits...
Remember Silverado, DUH! then their is this last debacle.
What provisions will it provide so Scum Suckers like Phil Graham and his evil cohorts do not circumvent it on the wee hours of a vote like the Bastard did in 1999.
How will they regulate the Lobbyist
Pass members of Congress and the Senate
The US Chamber of Commerce
The Special Interest groups
The Financial Institutions.
All well and good if it is a watered down approach and has no teeth but sounds good on paper what good is it.
Look these Clowns can wait and jury rig the system to FAIL so what are the safe guards.
These people have contacts through college, businesses and International contacts.
Will the Bill be strong enough to do what it is intended to do or just the business as usual.
Oh yes we had regulations for the great depression era then for Silverado and now the the DO NOT ask and we REFUSE to Tell TARP bail out, I have very little confidence in anything from the Hill they let Wall Street dictate to the present and now they want me to believe they are going to serve our best interest.
This is definitely a wait and see attitude on my part.
"Still, it sounds like a few good ideas here, I'll wait to see how this shakes out."
Roll back to previous, reinstate Glass-Stegall, heck I'd be a little happy if someone would just audit the effin Federal Reserve.
I guess I'd settle for a few crumbs of sanity in the industry.
They should repeal all of the repealing they did back in the 90's with Clinton.
Repeal all tax cuts to the super rich going back to Ronnie "rotten brain" Reagan. Repeal the repealing of the Fairness Doctrine, and find someone who looks like Obama - but is very liberal and progressive, and do a "Man behind the Iron Mask" switcharoo on him.
If Dodd wants to "give the FDIC power to unwind failed firms"
That is an obvious indication that he has no intention of returning to the "Glass Stegall act days"...when banks and investment firms were separate entities.
...very telling!...(if this "rumor" is true)
I guess it remains to be seen if the new "Financial Superregulator" will be an officer of the Executive Branch (like the Comptroller) under the purview of the Treasury Dept. or Commerce Dept., or an officer of a pseudo-private entity like the FED. Personally, I'd prefer the former, since they'd be a Presidential appointment that had to be confirmed by the Senate, but once having been confirmed they would be more or less defended against political pressures and lobby groups. And (more importantly), unlike the FED, because they are officially part of the executive branch their actions would have to be trasparent.
(The Right's reaction to Dodd's proposal will be predictable. If it's to be an executive branch position they'll whine about "more government," and if it's a FED position they'll whine about giving more power to the banks.)
I don't agree with some of the other comments, though. While I thought it was a dumb idea to repeal the Glass-Steagall Act with Gramm-Leach-Bliley and the CFMA, I don't think it was the Glass-Steagall Act that protected the American financial industry, per se. As conservatives like to point out ad nauseam, Europe never had a Glass-Steagall Act to separate banks from investment brokers, and the European financial system never collapsed as a result. But one thing that both the American and European systems had in common (while they were NOT collapsing) was that both had regulators of the financial industry who determined how much leverage financial institutions were allowed to use, and the maximum debt to capital ratio they were allowed to hold.
Prior to Gramm-Leach, the debt to capital ratio for banks was determined by the FED, and the debt to capital ratio for brokers was regulated by the SEC. I think the debt to capital ratio allowed for banks and brokerages was set at 10 to 1 and 12 to 1 respectively, or something like that. The problem with Gramm-Leach was that it allowed the two types of financial institutions to merge, but did not provide for any regulatory agency to regulate or determine the debt to capital ratio the new, merged institutions were allowed to carry. So...they essentially ran up as much debt as they felt like running up, completely unregulated. That was the problem. I think when Bear-Stearns collapsed they had a debt to capital ratio of 40 to 1.
That's why Alan Greenspan, lifelong Objectivist and all-round Rand Cultist testified before Congress that he was shocked (SHOCKED I tell you) that the financial industry, once released from regulation, failed to regulate ITSELF in the name of enlightened self-interest, and instead went on an orgy of reckless borrowing and investing, all for short-term profits.
Anyway, I'm not sure it's necessary to separate banks, investment brokers, and insurance companies as they were under Glass-Steagall. I think it's okay for them to merge, but you just need somebody to regulate or prevent reckless behavior and foolish debt to capital ratios. They also need somebody to step in and re-organize the executive compensation system so that executives are no longer rewarded for taking insane risks.
While the title makes it sound like Dodd wants to leave the Fed unregulated, he's actually seeking to strip them of their regulatory role and replaced with a government official to regulate THEM (if I read this correctly).
I'd edit that title.
I reread the article title and the article multiples and came to the same conclusion. I assume both of the mentioned agencies regulate banks perhaps it may be better to have just one independent agency regulating and enforcing regulations, how ever it's up to Dodd to show us how regulatory failures on the part of the FED and FDIC contributed to the current mess, and how this new one agency should prevent it in the future. I'm unsure how this would prevent Sheila Bar or any other chair of the FDIC from advocating on behalf of consumers. I'd rather see Congress get started doing the simple thing, as restoring Glass Stegall, but that may not be so simple because it's repeal was bipartisan. Get rid of the arcane law/regulation the GWB allegedly used to foil State from enforcing State law is regards to mortgages. I understand Canada requires those seeking to borrow money for a home to hire an attorney looking after their interests to examine the mortgage contract before signing the contract.
This actually makes a lot of sense. AIG for example, was able to choose to be regulated by the Office of Thrift Supervision, the smallest and most underfunded of the regulatory agencies. It effect, it was not regulated at all. Financial institutions should not be able to pick their regulator.
that the US congress is incapable of passing any kind of regulatory or socially progressive legislation and has been for 30 years. Reform bills are just scams to redistribute public wealth into the hands of those moneyed interests supposedly in need of reform legislation.
This woman was the watchdog who sounded the alarm for the impending financial collapse, she testified the books were being cooked and the threesome of Greenspan, Larry Summers and Richard Rubin all joined forces to silence her. She didnt back down. Her agency was then marginalized. Hearing Phil Graham argue to this woman that there is no need for regulation of derivatives made you want to gag. And he was John McCain's right hand man while Obama is surrounded by Summers and Geithner.
The fix is in.
Dodd sez...hmm. Did anyone see Michael Moore's "Capitalism-A Love Story?" Take a look at Dodd in that flick and you just might grow to hate the prick.
Oh yeah , I can see things will get better under Dodd and the Dems , they'll straighten things out ! The Dem's bill extending unemployment ended up at $24 billion , only 10 % or 2.4 billion actually going for unemployment , the rest ? Business tax breaks so that businesses large and small can recoup their losses from last year , another corporate give away . ( Link to article is over at the Raw Story ) Coincides with the no strings attached TARP $ and right along with the Insurance companies profit protection bill they are trying to pass , er health care " reform " bill I mean , excuse me .
Dodd is part of the problem and this is a back door way to help further deregulate another out of control corporate monopoly.
Our government has been taken over by corporate interests. Corporate financial influence is everywhere. Our reps are bought off and the media ignores the huge conflicts of interest involved with policy makers taking money from industries they are supposed to be reforming. watchdog groups that we rely on to protect us such as the FDIC, FDA, CDC, and the AMA just to name a few are now overrun with ex CEO's of the very corporations that these agency's are supposed to protect us from. Again the corporately owned media is silent and misses the point as we slowly become a nation of, by and for the corporations.
This also explains the watered down POS! health care reform bill and It explains why the pathetic bought off congressional reps are trying to tell us what a great deal they have pulled off for us, When in fact this is a huge victory for the for profit health care industry.
This is a country founded for "we the people". There is no mention of the word corporation in the US constitution.
Corporations used a backdoor bogus argument that claimed the fourteenth amendment gave them rights as people and that as such the notion arose of a corporation having constitutional status or protection. It's been down hill from there. The fourteenth amendment was to clarify laws regarding newly freed slaves and had nothing to do with corporations. This has to be clarified and the Corporate personhood repealed.
Corporations only exist by US law and yet they now own and run everything! We must take our country back from these corporate monopolies and put them in their place.
We need to start with campaign finance reform and term limits now!
I would choose Government over Corporate any time. Just not a government that has been infiltrated and corrupted by those same corporations.
All this is window dressing. Until Glass steagle or a law like it is in place, and the opaque trading that goes on is stopped the nation will wind-up back where it was a year ago only worse. I said this before all the fight over healthcare will be a moot point unless we get Wall street under control. Abuses by Credit card companies, while immoral, are not going to tip the country into a permanent depresion . People like the cEO of goldman sachs standing up in public and saying they are doing Gods work, while taking our money and using it like a deadbeat with an insurance settlemant will bankrupt the nation. reign in the parasites.
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