Magazine article American Banker

Much-Touted Bank Agency Consolidation Would Not Lighten Regulatory Burden

Magazine article American Banker

Much-Touted Bank Agency Consolidation Would Not Lighten Regulatory Burden

Article excerpt

Banking agency consolidation bills sprout like crocuses in the spring. They are outed as bold reform measures that will streamline our banking structure and ease the regulatory burden on banks.

Rep. Henry B. Gonzalez, chairman of the House Banking Committee, has intimated that once Congress adopts the "reform" he will not want to hear any more complaining by bankers about the regulatory burden.

He thus displays a frightening lack of comprehension about a fundamental problem facing the industry, about which his duties require him to be knowledgeable.

The regulatory burden stems not from the fact that we now have three federal agencies regulating commercial banks, but from Congress' repeated attempts to micromanage banks by passing too many laws that, in turn, spawn too many regulations.

The way in which rulemaking and enforcement authority have been parceled out among the regulatory agencies may tend to confuse outsiders trying to understand the intricacies of our banking system.

Nevertheless, bankers understand who regulates them. Bankers are not burdened by the fact that other regulators regulate other banks.

Admittedly, the current structure is not the most efficient one that could be devised. But to paraphrase what Winston Churchill said of democracy, the most efficient system is not necessarily the best.

Potential for Harm

The bald truth is that agency consolidation would probably not affect the regulatory burden at all. And one can even argue that consolidation would tend to make matters worse. …

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