US bank regulators dig in against Obama shake-up
Top U.S. bank regulators will speak out on Tuesday against some key elements of the Obama administration’s plan to reshape financial regulation, saying parts of it were unneeded or could be disruptive.
The officials’ defiance, in prepared congressional testimony obtained by Reuters, came despite a warning given to them on Friday by Treasury Secretary Timothy Geithner.
In private remarks punctuated with expletives, Geithner urged the regulators to end their turf battles and show support for President Barack Obama’s plan, according to a person familiar with the situation on Monday.
But that seemed to have little impact on John Bowman, acting director of the Office of Thrift Supervision (OTS), an agency slated for closure under the Obama plan.
“We do not support the administration’s proposal to establish a new agency, the National Bank Supervisor (NBS), by eliminating the Office of the Comptroller of the Currency … and the OTS,” Bowman said in written remarks to be given to the Senate Banking Committee at a hearing.
In addition, he said, “The OTS does not support the provision in the administration’s proposal to eliminate the thrift charter and require all federal thrift institutions to change their charter.”
Such words marked a retrenching of regulators’ opposition to portions of Obama’s plans to tighten oversight of banks and capital markets amid the worst financial crisis in generations and with the economy mired in a stubborn recession.
“We do not see merit or wisdom in consolidating federal supervision of national and state banking charters into a single regulator,” FDIC chairman Sheila Bair said in her remarks ahead of the hearing on regulatory reform.
At a tense, hour-long meeting on Friday, Geithner told Bair, Federal Reserve Chairman Ben Bernanke and Securities and Exchange Commission Chairman Mary Schapiro to end recent public criticism of the administration’s plan and stop airing concerns over their potential loss of authority.
The Wall Street Journal, which first reported the meeting, said Geithner vented frustration over the plan’s slow progress and told regulators that “enough is enough.”
Citing people familiar with the meeting, the newspaper also said Geithner used obscenities and took an aggressive stance in his dressing down of the regulators.
Treasury spokesman Andrew Williams said, “We planned this meeting as a venue to deliver a tough message to regulators that we should work together to get reform done – and focus less on protecting turf.”
Under the plan conceived by Treasury, banking supervision would be significantly consolidated.
But Bair, whose populist tone has won allies in Congress, in her prepared remarks for the banking committee hearing, said: “Prudent risk management argues strongly against putting all your regulatory and supervisory eggs in one basket.”
The Obama plan aims to bring a creaking system set up in the 1930s, with regulation spread across many agencies, into the 21st century. But it has met resistance not only from regulators, but the institutions that they supervise.
Groups such as the American Bankers Association and the Independent Community Bankers have expressed opposition.
FED POWERS QUESTIONED
John Dugan, Comptroller of the Currency, warned lawmakers in his remarks that the existing plan would wrongly give the Federal Reserve the right to ‘override’ the views of other regulators when it comes to supervising very large banks.
Such a move would “undermine the authority — and the accountability — of the banking supervisor” he said.
Federal Reserve Board Governor Daniel Tarullo argued for preserving the Fed’s bank oversight powers, with enhancements.
“It is essential both to refocus the regulation and supervision of banking institutions under existing authorities and to augment those,” he said in prepared remarks.