DODD CONTINUES PUSH TO STRENGTHEN BANK REGULATION

 

WASHINGTON – Today Senate Banking Committee Chairman Chris Dodd (D-CT) held a hearing on how to best strengthen bank regulation.  A wide range of experts agree that the nation’s convoluted system of bank regulation contributed to the financial crisis.

 

“I have heard from many who have argued that I should not push for a single bank regulator.  The most common argument is not that it’s a bad idea – it’s that consolidation is too politically difficult.  That argument doesn’t work for me,” said Dodd. 

 

“We must eliminate the overlaps, redundancies, and additional red tape created by the current alphabet soup of regulators.”

 

Dodd went on to detail priorities in bank regulation.  “We need to preserve our dual banking system.  And I feel just as strongly on that point as I do the earlier point.  State banks have been a source of innovation and a source of strength, a source of tremendous strength, in their communities.   A single federal bank regulator can work with the 50 state bank regulators.”

 

The chairman also recognized the important role played by community banks.  “Community banks did not cause this crisis and they should not have to bear the cost or burden of increased regulation necessitated by others.  Regulation should be based on risk - community banks do not present the same type of supervisory challenges their large counterparts do.”

 

The committee heard from Eugene A. Ludwig, Chief Executive Officer of the Promontory Financial Group and former Comptroller of the Currency, Martin N. Baily, a Senior Fellow at The Brookings Institution who served as Chairman of the Council on Economic Advisors under the Clinton Administration, Richard S. Carnell, an associate professor at Fordham University School of Law and former Assistant Secretary of Financial Institutions at the Treasury Department, and Richard J. Hillman, the Managing Director of the Financial Markets and Community Investment Team of the Government Accountability Office. 

 

“This afternoon, we will examine how best to ensure the strength and security of our banking system.  I would like to thank our witnesses for returning to share your expertise after the last hearing was postponed.” 

 

“Today, we have a convoluted system of bank regulators created by historical accident.  Most experts would agree that no one would have designed a system that looked like this.  For over 60 years, administrations of both parties, members of Congress across the political spectrum, commissions and scholars have proposed streamlining this irrational system.”

  

“Last week I suggested further consolidation of bank regulators would make a lot of sense.  We could combine the Office of the Comptroller of the Currency and the Office of Thrift Supervision while transferring bank supervision authorities from the Federal Deposit Insurance Corporation and the Federal Reserve, leaving them to focus on their core functions.”

 

“Since that time, I have heard from many who have argued that I should not push for a single bank regulator.  The most common argument is not that it’s a bad idea – rather consolidation is too politically difficult to achieve.  That argument doesn’t work terribly well with me, nor I would suspect, with many if not most of my colleagues.”

 

“Just look what the status quo has given us.  In the last year some of our biggest banks needed billions of dollars of taxpayer money to prop them up and dozens of smaller banks have failed outright.”

 

“It’s clear that we need to end charter shopping, where institutions look around for the regulator that will go easiest on them.”

 

“It’s clear that we must eliminate the overlaps, redundancies, and additional red tape created by the current alphabet soup of regulators.”

 

“We don’t need a super-regulator with many missions, but a single federal bank regulator whose sole focus is the safe and sound operation of our nation’s banks.  A single operator would ensure accountability and end the frustrating pass the buck excuses that we’ve been faced with over these many months.”

 

“We need to preserve our dual banking system.  And I feel just as strongly on that point as I do the earlier point.  State banks have been a source of innovation and a source of strength, a source of tremendous strength, in their communities.   A single federal bank regulator can work with the 50 state bank regulators.”

 

“Any plan to consolidate bank regulators would have to ensure community banks are treated appropriately.  Community banks did not cause the crisis and they should not have to bear the cost or burden of increased regulation necessitated by others.”

 

“Regulation should be based on risk - community banks do not present the same type of supervisory challenges their large counterparts do.”

 

“So we need to get this right, which is why you are all here today.  I am working with Senator Shelby and my colleagues on the committee to find consensus as we craft this incredibly important bill.”

 

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