Geithner accuses regulators of holding up reform
In an expletive-laden tirade, the US Treasury secretary has expressed his frustration with regulators, saying they are delaying approval of the Obama administration's regulatory reforms
Since its release, the Obama reform plan has drawn its fair share of criticism, mainly from regulatory agencies eager to retain their share of authority over the financial industry. These arguments are what led Geithner on Friday July 31 to deliver a tirade in the Treasury conference room to the regulators present that "enough was enough" and that they had been given enough time to share their concerns.
The hour-long meeting was attended by Ben Bernanke chairman of the Federal Reserve, Mary Schapiro, chairman of the Securities and Exchange Commission, and Federal Deposit Insurance Corporation chairman Sheila Bair, comptroller of the currency John Dugan, Commodity Futures Trading Commission chairman Gary Gensler and Office of Thrift Supervision acting director John Bowman. Under the new plans, all these bodies, save the Fed, will lose a portion of their oversight powers. Both Bair and Schapiro have expressed concerns about giving more power to the Fed to oversee systemically important firms, favouring a council approach, with power shared between the existing regulators.
Geithner is reported to have been expecting such a backlash from regulators protecting their turf, but what he hadn't expected was that their concerns would be given such support from lawmakers.
The meeting was described as unusual by the WSJ not only because of Geithner's language but also because he took such an aggressive posture with the regulatory agencies, which have been traditionally independent of the White House. Geithner is said to have reminded regulators that it is the administration and Congress that set policy, not them.
The main aim of the meeting was the refocused efforts on passing a reform bill before the end of the year, which initially all the federal agencies had agreed to. And aside from the thorny issue of whether the Fed or a council of regulators will oversee the new systemic council, a consensus has been reached on most of the plans, including remuneration and regulation of over-the-counter derivatives.
Barney Frank, chairman of the House Financial Services Committee, and Christopher Dodd, chairman of the Senate Banking Committee, both support passing the bill soon but have different ideas on what it will eventually contain. Dodd favours giving powers to an oversight council, while Frank has suggested he wants to maintain effective authority through "a sufficient broad base of participation and input".
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