Turns out there is life in the Universe.
"It reads like amateur hour and it's because none of those guys ever worked in a regulated, chartered bank," said Camden Fine, president and chief executive of the Independent Community Bankers of America, a Washington trade group representing small banks, referring to the authors at Treasury. "A bunch of guys from Wall Street decided this was going to be their proposal."
Lobbyists, Small Banks
Attack Plan For Markets
By DAMIAN PALETTA and ELIZABETH WILLIAMSON
April 1, 2008; Page A1
WASHINGTON -- Small banks, state officials and others began an assault on the Bush administration's sweeping plan to overhaul the nation's financial regulatory system.
Their criticism presages the long fight between regulators, financial institutions and a host of others if the proposals become legislation.
Treasury Secretary Henry Paulson on Monday formally announced calls for consolidating bank regulation, creating a new type of insurance charter, improving the oversight of mortgage lending and allowing the Federal Reserve to peek into more corners of finance.
The scope of the proposals and lobbying by the industries affected make quick action unlikely. But they come amid widespread concern over the state of financial markets, and some industry observers said that means anything can happen.
Large financial-services companies have had a seat at the table as Treasury crafted its plan, and many welcomed some of its broad principles, such as streamlining regulation. But groups such as Mr. Fine's community bankers, representing the smaller end of the spectrum, hold considerable sway in Washington. With members in nearly every congressional district, they are vital to the success of the plan.
U.S. Treasury Secretary Henry Paulson says the regulatory reform blueprint addresses "complex, long-term issues."
If the proposals move forward, "you will see a battle of the giants," said David John, senior fellow at the conservative Heritage Foundation and a former banking lobbyist.
Other groups expressing early opposition include credit unions, which are concerned that a single depository regulator would force them into a structure dominated by traditional banks. Smaller banks fret that creation of a single banking regulator will favor the desires of their bigger competitors. State prosecutors complain that a proposal to create a national insurance regulator would substitute their vigilance with weak federal oversight.
Mr. Paulson said he anticipated criticism but cautioned against describing his proposals -- which he called "the blueprint" -- as either trying to build up or tear down regulation. "Those who want to quickly label the blueprint as advocating more or less regulation are oversimplifying this critical and inevitable debate," he said. "The blueprint is about structure and responsibilities, not the regulations each entity would write."
The proposals come as regulators and lawmakers are considering other measures to tackle the housing mess. Mr. Paulson said Monday's blueprint wasn't meant to solve the housing crisis. The Treasury Department has other short-term initiatives focused on ways to stabilize financial markets.
Almost any of the proposed changes would have to be authorized by Congress, which could be a problem given initial reaction from Democrats. House Financial Services Committee Chairman Barney Frank (D., Mass.) said almost none of them could happen this year because lawmakers need to focus on housing-market problems.
Senate Banking Committee Chairman Christopher Dodd (D., Conn.) called the proposals a "wild pitch." Republican lawmakers were more supportive, but the consensus appeared to be that a long process was ahead.
Sweeping proposals often get short shrift because experienced lobbyists know they have little chance. But many in the financial world remember the swift passage of the Sarbanes-Oxley Act in 2002, designed to fix perceived problems in accounting and corporate governance following the Enron Corp. scandal.
"If you look at anything that happens in Washington where there's a major change, it only happens when there's a crisis," said Richard Kovacevich, chairman of Wells Fargo & Co., who supports Treasury's effort in general. "A crisis can shorten the timetable."
States attorneys general contend that the Paulson proposals will usurp their enforcement powers, particularly over the insurance industry. The proposals include calls for a federal insurance charter that would allow big insurers -- which are currently regulated by the states -- to more easily operate nationally.
WSJ's Damian Paletta parses Treasury Secretary Paulson's plan to overhaul the U.S. financial regulatory structure.
Mr. Paulson's "broader agenda of deregulating the financial industry...and shifting power from the states to the federal government [is] totally misplaced," said Iowa Attorney General Tom Miller, who heads a task force created by the National Association of Attorneys General on the subprime-mortgage crisis. Citing the insurance charter, Mr. Miller said Mr. Paulson "shouldn't be using this crisis to deal with his broader agenda."
The organization will join forces with the Conference of State Bank Supervisors to make its displeasure known to individual lawmakers and the administration, though Mr. Miller said the groups have yet to decide on methods.
Mr. Paulson argued that state regulation needed to be more even and consistent. He proposed creating a federal commission to judge and grade state policies related to mortgage lending. He said this was necessary in part because many of the problems in subprime-mortgage lending came from companies regulated by the states.
Mr. John, of the Heritage Foundation, said the coming fight will rival the storm leading up to the 1999 passage of the Gramm Leach Bliley Act. That law made it easier for securities firms and banks to be owned by the same company, dropping regulatory barriers in place since the Great Depression.
In 1998 and 1999, when Congress was finalizing passage of that law, the financial-services industry spent a combined $417 million on lobbying, according to the Center for Responsive Politics. In 2007, financial-services companies spent more than $402 million on lobbying, led by $138 million from the insurance industry.
The Financial Services Forum, a lobby group, will begin to formulate its strategy this month in Washington at a two-day summit of 20 top financial chief executives. The CEOs in the group include Kenneth Lewis of Bank of America Corp., Lloyd Blankfein of Goldman Sachs Group Inc. and Allstate Corp.'s Thomas Wilson.
At the high-security, no-media gathering -- spokesman Taylor Griffin wouldn't disclose the exact dates nor location -- "there will be an opportunity for member CEOs to discuss at length both the turmoil...and the short- and long-term regulatory responses," which will guide the group's lobbying effort, Mr. Griffin said.
Forum staffers spent the weekend reviewing the plan and working out "how we'll approach this," Mr. Griffin said. He said it was too early to have specifics, given its 218 pages.
Many of the lobbyists who will work on the plan are familiar with, and have pushed for, the broader provisions in the bill, such as the consolidation of oversight agencies. With the presidential and congressional elections looming and because short-term economic legislation is on the table, "very little will be done this session," said one financial-services lobbyist.
At the Treasury briefing, which took place in Treasury's Cash Room, Mr. Paulson took several questions after his speech. The first came from Daniel A. Mica, a former Florida lawmaker who is now president and chief executive officer for the Credit Union National Association, a trade group representing credit unions. Mr. Mica complained that the proposal could put his members out of business, a charge Mr. Paulson denied.
"We look forward to a dialogue," Mr. Mica said, before sitting down.
--Michael R. Crittenden contributed to this article.
Write to Damian Paletta at damian.paletta@wsj.com |
