June 02, 2009
Really Barney Frank?
Rep. Frank says not so much to a single financial services regulator...
"The suggestion that we're going to get to a unilateral bank regulator \something equivalent to the Financial ServicesAuthority is simply wrong," Frank told CNBC on Thursday, referring to the FSA regulator in the United Kingdom.
Industry sources said that the administration is looking at a way to consolidate the disparate banking regulators, among other sweeping changes to financial laws that the administration will likely propose in the next two weeks.
The plans remain in flux, and most if not all proposals under discussion would require congressional action before they were to take effect. Frank's committee is scheduled to hold hearings on financial restructuring the second and third weeks in June.
Other changes under discussion are the creation of a "systemic risk regulator" at the Federal Reserve to oversee large institutions that could threaten the economy; a consolidation of the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC); and a new commission to oversee financial products, sources said. "It's not just the structure of the regulatory authorities but the content of the regulation that is relevant," Frank said. Frank said that he preferred a "dual-track regulation" that combined existing banking regulators and the creation of a new systemic risk regulator.
OK, I'm with Rep. Frank on the fact that the regs themselves need to be tighter. Where we disagree is the regulators. The current crisis was created in large part not by lack of or lax regulation (like when the Bush SEC allowed the investment banks to leverage up to 30 to 1), though that played a huge part, but by regulator shopping that allowed AIG, a massive global insurer, to buy an S&L and move themselves to OTC regulation which allowed them to set up the Financial Products Group whose activities effectively, through what normal people call 'insurance fraud', bankrupted the company.
Would a systemic risk regulator have known about it? No and it still won't if Treasury's plan for derivative regulation is enacted. What we need is a single regulator that can't have it's purse strings cut by the Executive Branch and is overseen by Congress.
And it needs to have the ability to shut down bad actors in the market without nasty calls from Congress or the White House.
Posted by mcblogger at June 2, 2009 08:49 AM
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