State Financial Regulator Presents Views On Regulatory Reform

by 14 Jan 2009
WASHINGTON, D.C. (Jan. 14, 2009) -- Maryland Commissioner of Financial Regulation Sarah Bloom Raskin was one of seven witnesses to testify before the Congressional Oversight Panel at a public hearing on regulatory reform of the financial sector on Wednesday. The panel is in the process of preparing a special report on regulatory reform, Raskin, who serves as chairman of the Conference of State Bank Supervisors? Legislative Committee, provided the panel with a state perspective on the nation?s financial regulatory structure. ?We have often heard that the consolidation of financial regulation at the federal level is the ?modern? answer to the challenges of our financial system. I am here to challenge this assumption and ask you to challenge it as well,? she said. Raskin noted that the present regulatory system that has evolved since the enactment of nationwide banking in 1994 provides for both state-state and state-federal bank supervision. ?This is a model that has served this nation well, embodying our uniquely American dynamic of checks and balance,? she added. Raskin told the panel that the current crisis has both revealed and created weaknesses and gaps in the nation?s regulatory system, in addition to a gap in regulatory and political will in Washington. ?It is an old saying among bank regulators that our job is to take away the punch bowl once the party really gets going?.From the state perspective, it has not been clear for many years who was controlling the punch bowl,? she said. ?At the state level, we have sometimes perceived an environment at the federal level that is skewed toward facilitating the business models and viability of our largest financial institutions rather than promoting the strength of the consumer or our diverse economy,? she said. Raskin asserted that historical federal policy has fostered consolidation and failed to contain systemic risk. Further, the government?s response, including the TARP, is serving to create even larger and more complex institutions that actually increase systemic risk with little regard for the needs of smaller institutions and the communities that they serve. ?These responses have created extreme disparity in the treatment of financial institutions, with the government protecting those deemed to be too big or too complex to fail at the expense of smaller institutions, and perhaps of the diversity of our financial system,? she said. ?Our state-chartered banks may be too small-to-care at the federal level ? but where I sit, in our cities and communities, they are too important to ignore,? she added. ?The current crisis is the result of well over a decade?s worth of policies that promoted consolidation, uniformity, preemption, and the needs of the global marketplace over those of the individual consumer. If we have learned nothing else from this experience, we have learned that big organizations have big problems,? she said. In conclusion, Raskin suggested that policymakers should consider reforms that ?promote diversity and create new incentives for the smaller, less troubled elements of our financial system, rather than rewarding the largest and most reckless.? All testimony from Wednesday?s hearing is available at # # # CSBS is the nationwide organization for state banking, representing the bank regulators of the 50 states, the District of Columbia, Guam, Puerto Rico and the Virgin Islands, and approximately 6,000 state-chartered financial institutions. The Conference is responsible for defending state authority to determine banking structure and the products and services state-chartered institutions can offer and for improving the quality of state bank supervision by providing department performance evaluation and accreditation programs and supervisory education/training programs for state banking department personnel. Information Contact: Mary White, Vice President, Communications, (202) 728-5715,



Is TILA-RESPA a good or bad thing long term?