Small Banks, State Officials Unhappy with Overhaul Regulatory Proposal
In the wake of the Bush administration's proposal to overhaul the nation's financial regulatory system, small banks, state officials and others began their criticism of the plan.
"It reads like amateur hour and it's because none of those guys ever worked in a regulated, chartered bank," said Camden Fine, president and chief executive of the Independent Community Bankers of America, a Washington trade group representing small banks, referring to the authors at Treasury. "A bunch of guys from Wall Street decided this was going to be their proposal."
Treasury Secretary Henry Paulson on Monday formally announced calls for consolidating bank regulation, creating a new type of insurance charter, improving the oversight of mortgage lending and allowing the Federal Reserve to peek into more corners of finance.
The scope of the proposals and lobbying by the industries affected make quick action unlikely. But they come amid widespread concern over the state of financial markets, and some industry observers said that means anything can happen.
Large financial-services companies have had a seat at the table as Treasury crafted its plan, and many welcomed some of its broad principles, such as streamlining regulation. But groups such as Mr. Fine's community bankers, representing the smaller end of the spectrum, hold considerable sway in Washington. With members in nearly every congressional district, they are vital to the success of the plan.
If the proposals move forward, "you will see a battle of the giants," said David John, senior fellow at the conservative Heritage Foundation and a former banking lobbyist.
Other groups expressing early opposition include credit unions, which are concerned that a single depository regulator would force them into a structure dominated by traditional banks. Smaller banks fret that creation of a single banking regulator will favor the desires of their bigger competitors. State prosecutors complain that a proposal to create a national insurance regulator would substitute their vigilance with weak federal oversight.
Mr. Paulson said he anticipated criticism but cautioned against describing his proposals -- which he called "the blueprint" -- as either trying to build up or tear down regulation. "Those who want to quickly label the blueprint as advocating more or less regulation are oversimplifying this critical and inevitable debate," he said. "The blueprint is about structure and responsibilities, not the regulations each entity would write."
Source: Source: Wall Street Journal | Published on April 1, 2008
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