Editorials

<< Previous   of   Next >>   ADVERTISEMENT   HAVE YOUR SAY Feel strongly about something? Share it with the community by writing a letter to the editor. You’ll need to include your name, address and daytime phone number. (We’ll only publish your name and hometown.) We reserve the right to edit letters, but if you keep yours to 250 words or less, we won’t ask you to shorten it. If your letter is published, please wait 30 days before submitting another. Send it to: E-mail: letters@heraldnet.com Mail: Letters section The Herald P.O. Box 930 Everett, WA 98206 Fax: 425-339-3458 Have a question about letters? Contact Carol MacPherson (cmacpherson@heraldnet.com or 425-339-3472).   Published: Thursday, November 12, 2009 REGULATING BANKS Rules must strike balance The best way to avoid another major financial crisis, members of Congress and the Obama administration believe, is to plug holes in the regulatory system that allowed it to happen. Generally, they’re right. Specifically, how they go about it will have a lot to say not only about risky lending and reckless gambling by financial institutions, but about economic growth. The plan unveiled Tuesday by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) may put the latter at risk. Dodd proposes, among many other things, to consolidate four financial regulatory agencies into one colossus that would oversee all banks, of all sizes. Small community banks, the financial lifelines of most local economies, would be regulated by a separate division within the huge new agency. The problem with that plan was stated well by Gov. Chris Gregoire in a letter last month to the state’s congressional delegation. A single, federal banking regulator, she wrote, “would naturally focus its attention on the needs, wants and interests of the largest financial institutions and, even if unintentionally, administer policies and practices that would disfavor community banks. In the long run, this approach might restrict consumer and small business access to credit and might weaken local economies.” Talk about your crazy financial risks. Community banks are already at a disadvantage when it comes to raising capital, because many investors believe banks deemed “too big to fail” will be bailed out by the federal government if they run into trouble. Big banks apparently think the one-big-regulator plan gives them an edge — they support the idea. An overhaul plan in the House takes a more cautious and responsible approach, merging the four banking agencies down to three. Under the House plan, which is in line with what the White House has advocated, oversight of federally chartered banks would be done by the same agency that supervises savings and loans. The Federal Reserve and the Federal Deposit Insurance Corporation would continue to regulate banks as they do now — presumably with a keener, more learned eye on recklessness. That’s the course we recommend. The goal should be to provide rules and oversight that eliminate destructive behavior without unduly jeopardizing economic opportunity. Dodd’s proposal doesn’t strike that balance. READER COMMENTS Be the first to comment. You must be a registered user and verify your e-mail address to post comments to blogs or articles on HeraldNet. To register, click here. To read other terms and conditions, click here. Log out

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