Banking Lawyer Walter Moeling Comments On Today’s Senate Banking Bill

Walter Moeling, a banking law expert and head of the Financial Institutions practice at the international law firm Bryan Cave LLP, has some thoughts that we think are of great interest on the Senate Banking Bill being considered today:  

“As is often the case, the stated objectives of the Senate bill seem to be at odds with the bill's approach.  While the concept of a ‘single federal regulator’ has appeal, the bill continues both the Federal Deposit Insurance Corporation and the Federal Reserve, and it seems to swap OCC and OTS for a new Consumer Financial Protection Agency and the Agency for Financial Stability.  So the industry still ends up with four banking regulators. 
 
“The bill fails to address the fact that a major reason for the existing regulators' failures to head off our present economic situation resulted from a significant deregulatory environment, in which staffing on the supervisory side of each federal regulatory agency was cut by 30 percent to 40 percent, starting in the mid-1990s.  A strong argument can and should be made that had the agencies remained fully staffed, the excesses that crept into the banking system could have been recognized – and dealt with – much earlier.  In simple terms, had the on-site regulators been properly staffed and permitted to do their jobs, much of what happened could have been avoided.   Were that the case, there would be no need now for a horribly complex set of new rules and agencies.
 
“Bankers can and will adapt to whatever structure eventually evolves from the Congressional efforts.  What is critical today, however, is that these issues be resolved quickly.”