May 13, 2009
With the result of the bank stress test finally over, the Obama administration is shifting its attention away from the major banks and into the government’s own oversight structure. According to Treasury Secretary Tim Geithner, he and President Obama want the nation to have “more simplified, consolidated oversight structure.”
Regulators are discussing the substantial changes that need to be made in the regulatory system. Geithner and the Treasury will unveil a new proposal that aims to overall the entire banking industry. This is to prevent similar financial crisis in the future.
Despite the lofty intentions of the government, there are many questions surrounding the so-called resolution authority. Essentially, this is the creation of a single but powerful agency that monitors and assesses the risks that the financial system decides to take and deal with.
Already, the concept of consolidating all agencies involved in regulatory duties has been talked about but it remains a sensitive topic. Consolidating would mean that the existing power structure will be extensively replaced. Some agencies will overlap and will need to fold under larger ones. There are only a few agencies with major supervising roles right now including the Federal Reserve, the Securities and Exchange Commission, and the Federal Deposit Insurance Corp.
Many other agencies play more specific roles. Among these agencies are the US Commodities Future Trading Commission, Office of the Comptroller of the Currency, and the Office of Thrift Supervision among others. Because of its bad decision making in the past, the Office of Thrift Supervision is being scrutinized. It was in charge of supervising IndyMac, American International Group (AIG), and Washington Mutual which are renowned institutions that have contributed greatly to the financial disaster right now.
Geithner also revealed another plan. Previously, only major US banks have gained access to the bailout money because they were “too big to fail”. Now, the Treasury Secretary plans to give these dollars to smaller banks that need help. Even banking institutions with under $500 million in assets can apply for the Troubled Asset Relief Program (TARP) if they’re struggling with their losses. Some of the money returned by the big banks will be used for the TARP.
- Financial Reforms: What It Means to the Banking Industry
- Timothy Geithner’s Important Role
- Federal Reserve Bank’s Additional Powers – Weekly Round-Up
- Beneath the Surface: Problems of the TARP
- Banks Pay Back TARP
- Fed Tasked to Oversee Systematic Risks in the Financial Industry
- AIG Bailout: Did the Government Overpay?
- Bank of America Now Closing in on the $33.9 Billion Gap
- Geithner’s Plan to Clean Bank’s Toxic Assets
- Financial Overhaul: Will It Solve the Problems?