Republicans to Propose Financial Regulatory Reform – With Absolutely No Teeth
What’s up with the Obama administration’s much-vaunted plans for financial regulatory reform? First, The Washington Post reports that an ambitious proposal for a systemic risk regulator — a single agency to regulate and monitor banking and intervene if threats to the financial system emerge — is getting bogged down by all kinds of opposition. Smaller banks like their cozy relationship with their regulators just fine, thank you. Failed regulatory agencies that would be forced to go away are fighting to survive. (Office of Thrift Supervision, anyone?) And – no surprise here – the financial industry also is fighting off the idea of a Financial Products Safety Commission that would ensure people understood things like exploding interest rates on mortgages.
But the most unusual twist is a new financial reform proposal in the works from the GOP. According to Reuters, which cites draft documents of the idea, congressional Republicans are close to coming up with a proposal to rein in the Federal Reserve and expand the bankruptcy code.
Here’s the best part: The Republicans apparently want to create an advisory board of regulators – which would have absolutely no enforcement or oversight powers. Now that’s putting teeth into reform! Clearly, the Republicans are alone in finding that the financial crisis must have been caused by regulators with too much authority on their hands.
The Republican draft package opposes giving systemic risk authority to the Federal Reserve, an idea that sources have said the administration favors, but many lawmakers distrust.
Instead, the Republicans call for creating a board of regulators and outside experts, chaired by the Treasury secretary, to study systemic risk and report quarterly. The board would have no enforcement or supervisory powers.
Another high priority of the Obama administration is empowering an agency, probably the Federal Deposit Insurance Corp (FDIC), to seize and unwind troubled non-bank financial institutions. The idea is to avoid on-the-fly bailouts in the future like that of American International Group.
But Republicans, in a sharp repudiation of the bailout policies begun under former President George W. Bush, say in the draft document that they oppose such “resolution authority” and, instead, favor adding a new chapter to bankruptcy law.
I’m sure you feel much better about the stability of the financial system now. This reminds me of when the Republicans unveiled their alternative budget — with no details.
Maybe this new proposal for financial reform will come with charts as well.