NBS Senate hearing August 4th, 2009

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Senate hearing, August 4th

Strengthening and Streamlining Prudential Bank Supervision (Committee link)

View archived hearing webcast

Tuesday, August 4, 2009, 09:00 AM, 538 Dirksen Senate Office Building, room 538

The witnesses were:

  • The Honorable Sheila Bair, Chairman, Federal Deposit Insurance Corporation; (Testimony)
  • The Honorable John Dugan, Comptroller of the Currency (Testimony)
  • The Honorable Daniel Tarullo, Member, Board of Governors of the Federal Reserve System (Testimony)
  • Mr. John Bowman, Acting Director, Office of Thrift Supervision (Testimony)

The hearing discussed the witnesses reaction to the:

Administration proposal for "National Bank Supervisor"

Create New National Bank Supervisor:

The legislation creates a National Bank Supervisor through the consolidation of the Office of Thrift Supervision (OTS) and the Office of the Comptroller of the Currency (OCC). This consolidation will also eliminate the thrift charter and thrift holding company framework and remove one of the central sources of arbitrage in the bank regulatory system.

To see additional details on the proposal see National bank supervisor.

  • End Arbitrage on Bank Regulatory Fees:
  • Lower Regulatory Fees for Community Banks:
  • Providing a Regulatory Regime That Can Adequately Respond To A Financial Crisis
  • Provide The Government With Emergency Authority To Resolve Any Large, Interconnected Financial Firm In An Orderly Manner:
  • Authority to Appoint a Conservator or Receiver:
  • Require Prompt Corrective Action From Large, Interconnected Firms Should Their Capital Levels Decline:

Witnesses were postponed

  • The Honorable Eugene A. Ludwig, Chief Executive Officer, Promontory Financial Group
  • The Honorable Richard S. Carnell, Associate Professor, Fordham University School of Law
  • The Honorable Martin N. Baily, Senior Fellow, Economic Studies, The Brookings Institution.

Media coverage

"Disagreement within the Obama administration over reshaping U.S. financial regulation flared on Tuesday, with top bank regulators defending their turf against key parts of a broad bank supervision overhaul plan.

The officials' defiance, voiced before the Senate Banking Committee, came despite a stern warning from Treasury Secretary Timothy Geithner on Friday about the need for administration officials to line up behind White House priorities.

In expletive-laced remarks at a private meeting, Geithner urged regulators to end turf battles and support President Barack Obama's plan, said a person familiar with the matter.

But that seemed to make little impact on the regulators, who took issue with administration proposals for consolidating bank supervision and taking other steps to tighten oversight of banks and markets amid the worst financial crisis in decades.

With the economy in deep recession, the Obama plan is aimed at updating a system largely set up in the 1930s and simplifying a structure which has duties spread across many agencies. But the reforms have met widespread resistance.

"Some might argue there's a bit of turf protection here. That's natural," said Democratic Senator Charles Schumer.

Both Schumer and Senate banking committee chairman Christopher Dodd said Congress and the administration must look at the big picture...."

"Federal Deposit Insurance Corp. Chairman Sheila Bair opposes the merger of four existing federal bank regulators into a single agency, saying for the first time such a plan is “no panacea” for effective oversight.

Consolidating the agencies would disrupt regulatory staffs and may overlook the needs of community banks that rely on state supervision, Bair said in testimony at a Senate Banking Committee hearing today in Washington. Bair said she supports other aspects of the Obama administration’s overhaul.

“One of the advantages of multiple regulators is that it permits a diversity of viewpoints to be heard,” Bair said.

President Barack Obama is proposing to create a National Bank Supervisor by merging the Office of Thrift Supervision that oversees savings and loans with the Office of the Comptroller of the Currency that regulates national banks. Legislators are pressing further, suggesting Bair’s agency, regulator of some state-chartered banks, and the Federal Reserve, which has a similar role, give up supervision power to a single agency.

Policymakers had urged regulator consolidation after previous crises, “yet we didn’t act,” said Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat. “As a result we’ve had some real costs,” including regulatory lapses and lack of accountability, Dodd said.

Comptroller of the Currency John Dugan, OTS Acting Director John Bowman and Federal Reserve Governor Daniel Tarullo also testified.

‘Distractions, Confusion’

Consolidating the agencies would cause “distractions and organizational confusion” at a time when staff is tied up with banking industry challenges, Bair said.

Community banks would be ignored by a single regulator, she added. The structure should accommodate more than 8,000 banks in 50 states “with significantly different economies,” Bair said.

Bair and Dugan said they supported the administration’s proposal to merge the OTS and OCC.

“I can’t really defend the system of so many regulators,” Dugan said. “At the end of the day, if you put everything into one place, it would probably be too much.”

Dugan said he opposed the Obama proposal to consolidate consumer-protection examination and enforcement authority into a new Consumer Financial Protection Agency, saying those responsibilities shouldn’t be taken away from bank regulators.

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