Breaking the Banks

Today, Republicans prevented a 1,408 page financial regulatory bill, authored by Senator Chris Dodd (D-CT), from moving forward in the Senate.  The Democrats, in typical form, are trying to convince the American people that an entire industry is full of evildoers and they are accusing the Republicans of siding with the bad guys.

“But a party that stands with Wall Street is a party that stands against families and against fairness.” – Senator Harry Reid (D-NV)  [source:  www.foxnews.com]

The Democrats continue to insist that more regulation and greater federal government oversight are necessary to prevent future banking industry indiscretions and financial collapses.  But will the creation of 27 new regulations and a Bureau of Consumer Financial Protection really make things better and safer?  First, consider that the banking industry is already one of the most heavily regulated.  Financial institutions are currently subject to examinations by state and federal agencies including the Federal Reserve, the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC).  There are numerous regulations already in existence that dictate everything imaginable.  These can be found in things like Reg CC, Reg D, Reg E, Reg Z, CRA, FACTA, FCRA, GLBA, OFAC, Sarbanes-Oxley (SOX) and so on (see more at www.bankersonline.com).  The Heritage Foundation points out that the bill fails to address issues surrounding Freddie Mac and Fannie Mae, even though both of those agencies played major roles in the demise of the mortgage industry and the subsequent meltdown of the U.S. economy.  At the same time, the proposed bill gives the Secretary of the Treasury the right to seize institutions while strictly limiting the possibilities for courts overturning those decisions.  In other words, property may be seized at the discretion of an administrative bureaucrat without due process.  Finally, one should examine how increased legislation might impact the institutions serving our financial needs.  Increased regulatory pressures will only hurt smaller banks, potentially driving them out of business in an industry already dominated by a small number of giants.  You see, the banks that are “too big to fail” have the resources available to add departments dedicated to ensuring regulatory compliance while the little banks do not.  This could lead to even greater consolidation in the industry making the big banks even more dominant.  Of course, for our huge (and ever growing) government, this scenario only lessen headaches because there will be fewer institutions to oversee which makes central control all the easier to achieve.  Yes, it looks like our progressive friends now have their sights set on breaking the banks in the name of families and fairness.  Never mind the outcome will lead to less competition and fewer choices.  As with everything else, it is being done to save us from ourselves.

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