Banking Industry Must Unite to Fight Clinton's Plan for a Single Regulator

Article excerpt

The Clinton administration disguised income redistribution and higher taxes as deficit reduction.

Similarly, its proposal for a single bank regulator disguises political domination of bank lending as a way to simplify government and lower the cost of regulation.

The scheme also fails to address the urgent need to comprehensively reform regulation of the financial services industry.

The proposal has superficial attractions, including "reinventing government" and neatening the regulatory structure.

But looking deeply, one discovers that the real objective is political control of the economy and implementation of a social agenda - without the bother of getting legislation through Congress.

An Attack on the Fed

An independent, powerful Fed, with its responsibility to control inflation, is the principal obstacle to the fulfillment of that ambition. So the proposal contains what is arguably one of the cleverest and most dangerous attacks ever mounted on the independence of the Federal Reserve System.

How would the administration's goal be accomplished by the Federal Banking Commission?

First, by its composition. Members would be politically appointed, with relatively short terms - five years. The idea that they would be independent of the administration is transparent nonsense.

White House Control

In fact, the President would control three of the five commission votes - those of the chairman, the Treasury secretary, and the outside member from the President's party. They would be completely dependent on the administration.

Furthermore, the outside member from the opposition party would owe his position to the President.

The fifth member - the chairman of the Fed - would be effectively isolated.

Would the commission chairman and other presidential appointees be tough, experienced regulators, concerned with safety and soundness and the health of the industry? Or would they be more influenced by the politicians who approve their appointments, and by special interests - housing groups, diversity advocates, and others?

Worrisome Precedent

The recent appointment to the Federal Deposit Insurance Corp. board of an individual whose sole banking expertise is in government relations, community relations, and philanthropy answers the question - and the answer is extremely worrisome.

The political composition of the commission would make it susceptible to influence by members of Congress from the President's party - Republican or Democrat. …