By Leah Valencia, The University of New Mexico- Talk Radio News Service

Top U.S. Bank regulator Sheila Bair, chairman of the Federal Deposit Insurance Corp, told Congress that bank recovery may take longer than expected.

“While we are encouraged by recent indications of the beginnings of an economic recovery, [bank] growth may still lag behind historical norms,” Bair said during a hearing with the Banking, Housing and Urban Affairs Committee.

According to Bair, bank failures will remain high because household wealth loss was so pervasive and the general economy is weakened.

Bair urged policymakers to begin thinking about exit strategies in regards to their interventions in the financial markets.

“While these programs have played an important role in mitigating the liquidity crisis that emerged at that time, it is important that they be rolled back in a timely manner once financial market activity returns to normal,” she said.

Bair and other witnesses advised against the merging of regulatory committees.

“We are very concerned about this, I think it could weaken FDIC. It could overall weaken banking regulation.”

Bair said that although banks have come a long way in repairing the balance sheet, she cautions that restoration will continue into the next several quarters.

Rep. Barney Frank says, “We need to regulate for normal human beings and that’s what we hope to do. We think it’s important for there to be both regulatory structures that provide focused responsibility for the right kind of regulation and the appointment of individuals to do it.” (0:30)

 

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By Courtney Ann Jackson-Talk Radio News Service

U.S. Representative Barney Frank (D-Mass.) called Monday for the need for financial regulation enforcement.

Frank, the Chairman of the House Committee on Financial Services, issued remarks at a luncheon held at the National Press Club.

“We need to regulate for normal human beings and that’s what we hope to do. We think it’s important for there to be both regulatory structures that provide focused responsibility for the right kind of regulation and the appointment of individuals to do it,” said Frank.

Frank’s committee released a list of elements needed for regulatory reform. The list calls for a systemic risk regulator to identify and react to risks which arise from entities or activities that have the potential to jeopardize the financial system as a whole.

Frank also focused on consumer protection. His committee would like to propose a separate Consumer Financial Protection Agency for this purpose.

Said the Congressman, “I believe we can protect consumers from abuses without endangering the system…I invite the judgement of failure if we are not able to deliver that, and I will tell you I am not politically inclined to take on responsibility I don’t think I can handle.”

Frank believes that a legislative package with these things included will be presented by the end of the year.

In addition, Frank implored his committee to address issues such as securitization market accountability, an end to regulatory arbitrage in domestic and international markets, and the tightening of derivative regulations.

By Courtney Ann Jackson-Talk Radio News Service

Financial industry leaders were in agreement Friday that the Obama administration’s proposed financial regulatory reform is necessary, noting that the reform will renovate and strengthen the financial marketplace and many of its regulations. During a Committee on Financial Services hearing Friday, many of the panelists applauded the administration’s proposal.

“We fully support the Administration’s five key principles for strengthening consumer protection-transparency, simplicity, fairness, accountability, and access-and we are pleased to see the Chairman carry these principles forward as he works to fill the regulatory gaps to protect consumers,” said Diahann Lassus on behalf of the Financial Planning Coalition.

Other panelists highlighted the administration’s “diagnosis of the deficiencies” of the current financial framework. They said it is outdated and some aspects have led to confusion and inefficiencies for years now.

Regulations received much attention with panelist Robert Nicholas, President and COO of Financial Services Forum, saying the framework as it currently stands, “undermines regulators’ ability to ensure institutional and systemic safety and soundness-helping to create the opportunity for, and exacerbating, the current financial crisis.”

Committee member Rep. Paul Kanjorski (D-Pa.) noted a survey by ShareOwners.org that sites 58 percent of investors are now “less confident in the fairness of the financial markets” than they were one year ago. He noted that a major reason for the lack of confidence is due to the failure of regulators.

“We must enact strong new laws,” said Kanjorski.

By Learned Foote- Talk Radio News Service

On Wednesday, a panel of banking experts expressed reservations over certain aspects of the regulatory reform proposals that the Obama administration has put forth.

In a hearing before the House Financial Services Committee, representatives from the financial services industry criticized plans to create a Consumer Financial Protection Agency.

In recent weeks, Committee Chairman Rep. Barney Frank (D-N.J.) cited a “flood of complaints” regarding practices in the financial industry. Rather than create laws to deal with each complaint, Frank has argued that conflict could be mitigated by a Consumer Financial Protection Agency.

Steve Bartlett, President and CEO of the Financial Services Roundtable, acknowledged that the “status quo is unacceptable,” and argued that regulation reform “should be comprehensive, should be systemic, and should be quite large in terms of its scope.” He criticized the current system of regulation, which he said featured “hundreds of different agencies who regulate the same companies with the same activities in totally different ways based on different statutes, different standards.”

Bartlett nonetheless emphasized that he and his company “strongly oppose” the creation of a new agency, and recommended that Congress instead pass legislation enacting “strong national consumer protection standards.”

Steven Zeisel, Senior Counsel at the Consumer Bankers Association, said that he supported regulatory reform as well, but expressed reservations about the CFPA. He said that the legislation could require retail banks in different states to follow many different laws, which could make lending more complex, and could potentially the limit the availability of credit while raising costs for the consumer. He also said that the legislation will require banks “to offer products designed entirely by the federal government,” which could stifle innovation.

Rep. Scott Garrett (D-N.J.) said, “I don’t think Americans want government bureaucrats deciding if they are smart enough, sophisticated enough to take out a line of credit at the local retailer, or policing whether the credit cards that they choose offer reward points or not. When you come down to it, having choices is part of being an American.”

Rep. Maxine Walters (D-Calif.) harshly criticized the arguments of the panel. She said that they had “no real support for a consumer finance agency to protect consumers from these exotic products that worry us so much.” “You will work your magic with your influence in the Congress of the United States to keep any real strong legislation from ever coming out of here,” she continued. She also disputed the claim that the CFPA would raise consumer costs.

“I am just dumbfounded that we have before us representatives of the overall industry here today who do not appear to understand we have a crisis,” she said.

Rep. Jeb Hensarling (R-Texas) harshly criticizes the proposal to create a Consumer Financial Protection Agency, calling it “one of the greatest assaults on economic liberty in my lifetime.” He says that the agency would reduce choices for Americans and will essentially be “Orwellian”. (1:12)

 

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Steve Bartlett, the president and CEO of the Financial Services Roundtable, says that regulatory reform is necessary and consumer protection is needed. However, he opposes the creation of a Consumer Financial Protection Agency. Bartlett recommends strong national consumer protection standards instead. (0:42)

 

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By Celia Canon – Talk Radio News Service

During an address on Latin America and the economic crisis at the Brookings Institute yesterday, Chilean President Michelle Bachelet discussed her country’s comparatively strong economy, explaining that the 1980’s economic crisis in Latin America taught the region to take measures to insulate itself from global financial crises.

“This time in Latin America, fundamental [institutions] were better and policy responses were swift,” Bachelet said. “Central banks move quickly to offset the lack of liquidity in dollars using either sovereign funds or international reserves accumulated during the commodity boom earlier this decade.”

Chile’s current financial stability is largely due to the fact that it has moved away from American policies in recent years, eschewing the Washington Consensus, a set of American recommendations to Latin American states on how to rebuild their economies in 1989. The recommendations focused on maintaining a free market economy with little to no government involvement.

“This approach of no regulation is an approach that we have come to call in Chile the ‘Paradigm of Passivity,’ ” Bachelet said. “The crisis has taught us what we should have known all along: that the state is not and cannot be passive when it comes to economic activity or financial regulation.”

The Chilean president added: “When I talk about not being passive, I’m not talking necessarily about [an] interventionist state. I’m not calling for a government involved in all sectors of the economy or prone to over-regulating markets.”

Bachelet also compared Western states and Chile with regard to the policies implemented to reduce the impact of the global financial crisis.

“Unlike the U.S. and much of Europe, in 2009, tax payers have not have to pay the burden of bailing out” national companies, said Bachelet.

Additionally, the Chilean government has produced its own stimulus package, which aims to maintain the population’s purchasing power, rather than bail out industries.

“This [stimulus] package was designed to inject resources directly into the pockets of the most deprived families to promote employment by increasing public investment, and by granting subsidies to youth employment and to encourage private investment with temporary tax rebates,” Bachelet said.

Bachelet, a moderate socialist, is currently in Washington, D.C. to meet with President Barack Obama in hopes of increasing bilateral ties and improving trade partnerships. During her speech, she was quick to empathize with the Americans, echoing Obama’s frequent calls for an economic restructuring to lead to “lasting prosperity.”

States should not “go back to the same situation that we were in before, because that would mean we haven’t learned the lessons of the crisis,” Bachelet said.

The Chairmen of several U.S. financial regulatory agencies outlined a series of steps that can be taken to provide better oversight for Over-the-counter (OTC) derivatives dealers.

Appearing before the Senate Banking, Housing, and Urban Affairs Committee Monday, Gary Gensler, the Chairman of the Commodity Futures Trading Commission articulated the need to lower systemic risk, prevent fraud, and increase transparency in the OTC derivatives market.

“If we are not fully able to regulate the dealers, we will not give the American public the comfort they need,” explained Gensler.

The hearing comes shortly after President Barack Obama’s call for sweeping regulatory reform, which aims to establish a regulatory body to oversee the entire financial system, provide transparency for large private investment funds, and supervise agencies that offer credit-ratings.

When asked by Sen. Mike Johanns (R-Neb.) if the proper regulation would have prevented the failure of insurance giant American International Group (AIG), Gensler responded, “I think that a number of features here would have slowed down and maybe even have stopped [AIG’s collapse].”

Harvey Pitt, CEO of Kalorama Partners, LLC says that democrats in Congress are opposing a regulatory reform that is similar to a democratic proposal from the 1990s. (0:31)

 

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