An important view about the impact of consolidating all bank supervision in a “National Bank Supervisor“. From the opinion piece of FDIC Chair Sheila Bair in the New York Times yesterday…
~~~~”… Concentrating power in a single regulator would inevitably benefit the largest banks and punish community ones. A single regulator’s resources and attention would be focused on the largest banks. This would generate more consolidation in the banking industry at a time when we need to reduce our reliance on large financial institutions and put an end to the idea that certain banks are too big to fail. We need to shift the balance back toward community banking, not toward a system that encourages even more consolidation.
A single-regulator system could also hurt the deposit-insurance system. The Federal Deposit Insurance Corporation currently supervises state banks. The loss of a significant regulatory role would limit its ability to protect depositors by identifying and assessing risks in the financial system.
We can’t put all our eggs in one basket. The risk of weak or misdirected regulation would be increased if power was consolidated in a single federal regulator. We need new mechanisms to achieve consensus positions and rapid responses to financial crises as they develop.
I have advocated the creation of a strong council of federal financial regulators. This council would monitor the financial system to help prevent the accumulation of systemic risks and would also have the authority to close even the largest institutions. But we don’t need — and can’t afford — to depend on one supreme regulator to have sole decision-making authority in times when our entire financial system is in flux….”~~~~