Magazine article American Banker

Hoenig Latest Fed Official to Join Chorus against Consolidation Plan

Magazine article American Banker

Hoenig Latest Fed Official to Join Chorus against Consolidation Plan

Article excerpt

WASHINGTON -- Joining the central bank's vocal battle against the Treasury Department, the president of the Federal Reserve Bank of Kansas City last week attacked the administration's plan to consolidate the banking industry.

Thomas M. Hoenig warned that the consolidation of banking oversight under a single regulator could jeopardize the dual nature of the banking system, increase fears of regulatory burden, and politicize banking regulation.

What is more, Mr. Hoenig said, a single regulator could crimp credit availability. And the advertised savings of the administration's plans "are likely to prove illusive," he warned.

High-Profile Assault

"Potential cost savings might be more likely realized under regulatory streamlining that stops short of placing everything under a single federal agency," he said in a speech to the Kansas Bankers Association.

Mr. Hoenig's comments were the latest in a high-profile assault by the Fed on the administration's regulatory consolidation proposal, which would strip the Fed of most oversight.

Fed Chairman Alan Greenspan, Vice Chairman David Mullins, and other top officials have spoken out in speeches, interviews, and newspaper commentaries in recent days.

The Fed's 12 district presidents are expected to continue drumming up opposition to the administration's plans in speeches and commentaries during the next few weeks.

Alternative Proposal

The Fed has proposed an alternative plan that would involve less radical consolidation and preserve the central bank's strong hand in regulation. …

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