Where are the banking regulators?
As the banking crisis continues to unfold on Wall Street, a lot of fingers are pointing at Washington and asking what happened to the people who're supposed to keep an eye on the market. Jeremy Hobson reports.
Attending a hearing before the Senate Banking Committee on March 4 on Capitol Hill are, from left, Federal Deposit Insurance Corporation Chairman Sheila Bair, Comptroller of the Currency John Dugan, Office of Thrift Supervision Director John Reich, National Credit Union Administration Chairman JoAnn Johnson, Federal Reserve Board Vice Chairman Donald Kohn, Iowa Superintendent of Banking Thomas Gronstal. (Alex Wong/Getty Images)
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KAI RYSSDAL: As this banking crisis continues to unfold on Wall Street, a lot of fingers are pointing at Washington, and asking what happened to the people who're supposed to keep an eye on the market. Why didn't they see this coming, and why didn't they stop it?
Jeremy Hobson reports from Washington.
JEREMY HOBSON: Out of crises come new rules, and Democrats, eager for more regulation on Wall Street, see an opportunity. Here's Senator Charles Schumer speaking on ABC's "This Week."
CHARLES SCHUMER: Here we have 30 different regulators dating back from the 40s when the economy was much different. They tell companies different things, and many areas they don't cover at all.
Investment banks, for instance, don't face the same capital requirements as commercial banks. Schumer says if they did, Bear Stearns could have stayed out of trouble, and there's a move in Washington to create greater access to government loans for greater regulation, but not everyone is on board. Former FDIC chairman William Isaac now consults with banks on how to deal with regulators.
WILLIAM ISAAC: I don't see how you can regulate investment banks and still have them function throughout the world, because the rest of the world's not going to be regulating theirs.
But even Bush administration officials, who are wary of tough new regulation, recognize the political reality. The Treasury Department is drafting its own plan to overhaul the regulatory system, hoping to head off ideas in Congress. Professor Steve Thel teaches securities regulation at Fordham Law School.
STEVE THEL: There's political pressure for regulation and perhaps a hope that the response will only be to streamline and regularize regulation but not substantially increase it.
Either way, the fight over what to do starts next week when Congress gets back from Easter break.
In Washington, I'm Jeremy Hobson for Marketplace.
