In a Senate Banking Committee hearing yesterday, Sen. Chris Dodd, D-Conn., continued his push for a single financial regulator, saying the argument that such an overhaul is too complex ‘doesn't work terribly well with me.’
‘The most common argument is not that it's a bad idea – rather, consolidation is too politically difficult to achieve,’ said the committee chair. Dodd last week proposed the formation of an entity that would not only combine the Office of the Comptroller of the Currency with the Office of Thrift Supervision, but that would also take over the supervisory roles played by the Federal Reserve and the Federal Deposit Insurance Corp.
Regulatory stringency should be commensurate with the risks posed by specific institutions, Dodd suggested, adding that community banks "should not have to bear the cost or burden of increased regulation necessitated by others."
Eugene Ludwig, CEO of Promontory Financial Group, was among those who testified before the committee. A former U.S. comptroller of the currency, Ludwig refuted claims made by opponents of a regulatory consolidation that financial institutions do not shop around for regulators that best suit their needs. Even if charter flipping is not prevalent, "the threat of it has pernicious implications," he said.
"Sometimes stated directly, sometimes indirectly, often by the least well-run banking organization, the threat of charter flipping eats away at the ability of examiners and, ultimately, the regulator agency to be the clear-eyed referee that the system needs to be," Ludwig commented.
SOURCE: Senate Banking Committee