How many bank regulators is too many?
President Obama wants to clean up the regulation of banks. As Steve Henn reports, the president might want to start out by streamlining the entire system.
A bank sign (iStockPhoto)
More on America's Financial Crisis
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Kai Ryssdal: Once he was done with his housing announcement, the Treasury secretary walked across the street to the White House. He and President Obama met with congressional leaders to figure out how to prevent the next financial crisis.
President Obama: Strong financial markets require clear rules of the road, not to hinder financial institutions, but to protect consumers, and investors, and ultimately to keep those financial institutions strong.
Regulation is another way to say rules of the road. But Washington regulators already own a big chunk of some of the biggest banks in this country and the problem doesn't seem to be getting any better. So you have to ask, how many regulators is too many?
Marketplace's Steve Henn reports.
STEVE HENN:Hal Scott sums up America's system of financial regulation in just four words.
Hal Scott: Highly fragmented and ineffective.
Scott's a Harvard law professor and an expert in capital market regulation. He says right now so many different agencies are in the regulatory mix it's almost impossible to know how many.
Scott: One person counted 200 because there are a number of regulators at the state as well as the federal level.
You might think this would make our financial system safer -- but actually it allows banks to shop around for the regulators they like. And both state and federal regulators depend on fees from banks to survive.
Scott: What that does is create competitive pressures among regulators. It is the classic race to the bottom.
Scott says first the administration needs to figure out who is charge of keeping an eye on the biggest institutions. And then make sure all the different agencies like the Fed, the SEC and state regulators are talking to each other.
But Bill Black, who's a former bank regulator, believes streamlining the system's not enough. He says Congress needs to launch an investigation aimed at fraud and abuse in the banking system.
BILL Black: We would consider it insane if someone came out and said we are not going to do an investigation of why these recent plane crashes occurred. That's backward looking, we want to be forward looking.
But that's the line in Capitol Hill now.
In Washington, I'm Steve Henn for Marketplace.
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