Exclusive outtakes from industry leaders
When a regulator talks, do banks listen?
Banks are returning to profitability after the financial crisis and the head of the Federal Deposit Insurance Corp is trying to nudge them into lending again.
“You can’t force them to lend,” FDIC chairman Sheila Bair says. “But I think jawboning helps.”
The U.S. banking industry reaped big profits in 2010 as the financial crisis faded further into the distance.
If all the regulator can do is try to talk them into increasing lending, why should banks listen?
The 2010 Reuters Washington Summit included 4 days of on-the-record interviews with policymakers, congressmen and Obama Administration officials here in the DC bureau. The interviews covered a wide range of topics…from the impact of the mid-term elections to the importance of the Lady Gaga vote.
With less than six weeks to go before the mid-term elections the focus was on what a potential shift in power to a Republican-controlled Congress could mean for policy priorities in the coming year. We heard from Senators’ McCain, Dodd, Gregg and Bingaman. On the House side we spoke with the man responsible for getting Democrats elected…Rep. Chris Van Hollen, Chairman of the Democratic Congressional Campaign Committee. He called this election season a “tough and challenging environment,’ but predicted Democrats would retain control of the House.
The latest blame game circulating in Washington on financial regulation may end up with those who point fingers finding that they have three fingers pointing back.
During the debate on tightening financial regulations, there have been some backhanded jabs at regulators with the implication that perhaps they were asleep at the wheel. Just this morning on NBC’s “Today” show, Democratic Senator Claire McCaskill said Wall Street had been creating things just to bet on — “they were like the casino, but they had less regulation than Las Vegas.”
Congress needs to get off the dime and create a resolution authority that would break down failed institutions in an orderly manner, since the lack of such an authority is driving policy decisions, according to Sheila Bair, head of the Federal Deposit Insurance Corp.
Speaking at the Reuters Global Financial Regulation Summit in Washington, Bair said that gap has fed into the too-big-to fail presumption and created a dilution in market discipline for those who invest and extend credit to very large institutions.
“We think Congress should give a very high priority to providing a resolution mechanism for very large organizations, Bair said. “The lack of this mechanism is driving policy choices right now.”