Regulation: the Dodd plan for a single banking regulator
The 'net is abuzz: US Senate Banking Committee Chairman Christopher Dodd is raising the prospect of slaughtering sacred cows. He has dared to ask one of the most basic questions of all: why does the USA need so many different groups regulating banks? Good question. Surely there can be no complaints about that? Ha! Can you hear the sound of vested interests clanking?
To put it mildly, US banking regulation is a mess. Banks have to deal with multiple regulatory bodies - which have different agendas, in some cases agendas that change with the whim of politicians.
The first criticism made of Dodd's suggestion has been perhaps the most ridiculous: that it would delay Barack Obama's ideas for improving the supervision of banks and capital markets.
Dodd, however, has done what Obama and his team dared not: take on the people who failed to identify and prevent the current financial crisis - and who may, in some respects, justifiably be regarded as the architects of it.
Obama is not opposed to some rationalisation: he supports the idea of merging the Office of Thrift Supervision and The Comptroller of the Currency. But the Obama plan calls for the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) to remain as they are.
But as reported elsewhere in BankingInsuranceSecurites.Com today, FDIC is broke. One obstacle to the Dodd plan may be a presumption that if it is merged with state-run regulators that it should receive state funding. And there is no way that Obama wants to have to find the USD100,000 million that FDIC appears to need to keep it going.
Download PDF version of this page