The federal government is considering having one regulator to oversee the entire banking system. The mess in the industry is so great that the idea of consolidating the power to control the sector may be a good idea, but the bureaucracy behind the move is likely to be immense. Merging federal agencies is not likely to be easy and the plan will probably require Congressional approval. It will also face resistance from current agencies that do not want to lose their power bases.
According to The Wall Street Journal, “The new bank regulatory agency could prove controversial because it would consolidate the Office of the Comptroller of the Currency and the Office of Thrift Supervision and strip supervisory powers from the Federal Reserve and the Federal Deposit Insurance Corp.”
It is hard to make the argument that one agency is better than four, five, or six. The FDIC has a specialized role in the banking system as does the agency the regulates thrifts. Moving them to a new operation which will be much larger and probably more cumbersome does not solve the problems of large bank losses, low industry capital, and a future of real estate and consumer credit write-offs.
Once the banking system gets back to normal — if it ever does — the fact that the process was managed by one agency or several will not matter much.
Douglas A. McIntyre
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