The Obama administration said Friday it only wants the big banks to pay for its proposed Consumer Financial Protection Agency. It may be a way to curry favor with the nation’s community banks, but we don’t think they’ll bite, Mr. President. They say there’s plenty of adequate regulation oversight, and we agree.
According to a Reuters report, banks and financial firms not under direct federal supervision will have to pony up more for the proposed Consumer Financial Protection Agency.
And those banks "with more than $10 billion of assets will also pay more for tougher oversight by their existing regulators," Reuters said.
A Treasury official made it clear that community banks will be spared any additional increase.
"The largest firms – those with assets over $10 billion – will pay more for prudential and consumer supervision, while community banks will not pay any more for supervision than they do today," a Treasury official said.
We guess it’s good news that community bankers won’t have to pay for something they definitely don’t want, but we still do not see the reason why a third regulatory body needs to be born in the first place.
The administration’s idea is to create another level of oversight that would keep "dangerous financial products away from vulnerable consumers," according to Reuters. While the current regulators surely fell asleep at the wheel when it came to keeping those ‘dangerous products’ away from some customers who could be labeled as ‘vulnerable,’ why can’t the Treasury, the White House or Congress work to fix the regulators it has?
Even the regulators are screaming that they do not want their authority usurped by yet another level of bureaucracy, which would "have broad power to write and enforce rules on financial products and services," according to Reuters.
Isn’t that what the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency are for? Why not bring those financial institutions that are outside the current regulatory umbrella under their purview?
Peter Conrad, president and CEO of Boston’s Cooperative Central Bank, agrees.
"The current enforcement at the state and federal level is more than adequate. We think the banking commissioner does a terrific job. The compliance efforts by the FDIC and the Fed works just fine. They’re quite thorough."
He added, "We weren’t the ones that bamboozled the public by skirting the rules."
Paul Merski, the chief economist for the Independent Community Bankers of America, said the idea that elected officials can’t fix the current regulators and instead want to add to the red tape doesn’t make sense.
"That’s the heated debate: Who’s doing the regulation? Who is going to regulate the institutions? One of our key premises is you bring the unregulated risk takers under regulation. The activities and players who caused the meltdown are not even under any regulatory structure."
And he added that while he can’t endorse the regulations currently on the table, it’s important that community banks not be the ones paying the onerous new fees "because they had little to do with the activities that caused the meltdown."
"There are 8,000 community banks nationwide that are the more common sense type of lenders, who didn’t engage in credit default swaps and needed billions in bailouts. Car insurance companies don’t charge the same premiums for someone driving [an expensive sports car] that someone who drives a Ford Focus," Merski said.
We know that the president and Congress want desperately to look like they are doing something for the good of those who walk along Main Street. But we think consumers know who caused the current economic climate, and it was not the community bank on the corner. Go back to the drawing board and shore up those regulators you already have at your service, Mr. President.
