Published: Tuesday, December 16, 2008
GUEST COMMENTARY
Banking-system changes could spell disaster
The state of Washington has kept close tabs on our financial marketplace for more than 100 years. I am proud to say that we have a banking system that is safe and efficient. That's the good news. The bad news is the state's ability to regulate financial institutions is in danger because of a proposal by the U.S. Treasury Department.
The "Blueprint for a Modernized Financial Regulatory Structure" would put consumer protection in the hands of monolithic federal regulators, eliminate the dual banking system and gut state regulatory authority across nearly the entire financial services spectrum.
It is ironic that, while federal regulators permitted financial institutions to engage in risky investments leading to the current meltdown, state-chartered institutions were largely untouched. This was due, in part, to the vigorous and prudent oversight that states provided their institutions even as federal oversight vanished.
The Washington State Division of Banks currently monitors and regulates more than 90 state-chartered financial institutions, including commercial and mutual savings banks, savings and loan associations and independent trust companies. It acts as another set of eyes to keep your money safe. The Treasury proposal loses sight of the fact that multiple regulators serve as a check and balance against abuse of power.
At least a half dozen Washington banks are expected to receive hundreds of millions from the U.S. Treasury's Troubled Asset Relief Program (TARP). That huge infusion of capital, combined with the Treasury plan, will likely spur mergers and acquisitions as stronger banks swallow up weaker institutions. If it is true, as Treasury Secretary Hank Paulson has stated, that the government rescued several banks because they were "too big to fail," why would we create more such banks? Won't that further exacerbate the problem? We would all lose.
Rather than make sweeping changes to federal banking policy, the new administration should acknowledge the role states play in maintaining an open and competitive financial system by strengthening state oversight.
State Sen. Jean Berkey (D-Everett) is chair of the Senate Financial Institutions & Insurance Committee.
The "Blueprint for a Modernized Financial Regulatory Structure" would put consumer protection in the hands of monolithic federal regulators, eliminate the dual banking system and gut state regulatory authority across nearly the entire financial services spectrum.
It is ironic that, while federal regulators permitted financial institutions to engage in risky investments leading to the current meltdown, state-chartered institutions were largely untouched. This was due, in part, to the vigorous and prudent oversight that states provided their institutions even as federal oversight vanished.
The Washington State Division of Banks currently monitors and regulates more than 90 state-chartered financial institutions, including commercial and mutual savings banks, savings and loan associations and independent trust companies. It acts as another set of eyes to keep your money safe. The Treasury proposal loses sight of the fact that multiple regulators serve as a check and balance against abuse of power.
At least a half dozen Washington banks are expected to receive hundreds of millions from the U.S. Treasury's Troubled Asset Relief Program (TARP). That huge infusion of capital, combined with the Treasury plan, will likely spur mergers and acquisitions as stronger banks swallow up weaker institutions. If it is true, as Treasury Secretary Hank Paulson has stated, that the government rescued several banks because they were "too big to fail," why would we create more such banks? Won't that further exacerbate the problem? We would all lose.
Rather than make sweeping changes to federal banking policy, the new administration should acknowledge the role states play in maintaining an open and competitive financial system by strengthening state oversight.
State Sen. Jean Berkey (D-Everett) is chair of the Senate Financial Institutions & Insurance Committee.
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