Bair criticises regulation plan

Bair criticises regulation plan
By Joanna Chung in New York
Copyright The Financial Times Limited 2009
Published: June 19 2009 15:56 | Last updated: June 19 2009 15:56
http://www.ft.com/cms/s/0/c4953302-5cde-11de-9d42-00144feabdc0.html


Sheila Bair, the chairman of the Federal Deposit Insurance Corporation, on Friday went public with her criticism of the Obama regulatory plan, saying her agency should have a bigger decision-making role over firms that pose systemic risk.

‘’We would obviously like a seat at the table, a decision-making role,’’ Ms Bair said in an interview with CNBC. “The FDIC has tremendous exposure to the system so we would like a real say on systematic risk issues.”

Her comments come ahead of what is likely to be intense wrangling over the details of the Obama administration’s sweeping plan to overhaul financial regulation. The plan needs Congressional approval.

Under the plan, the Federal Reserve would assume the primary responsibility for averting financial crises and overseeing institutions that are deemed ‘’too big to fail.’’While a council of financial regulators – of which the FDIC would be a member – would improve co-ordination between different agencies, the real power would reside with the Fed.

Ms Bair, who wants the council to have more ‘’teeth,’’ urged legislators to have a robust debate on the appropriate role of the council and the Fed.

‘’This is an institutional issue, it’s not a turf issue or personality issue,’’ she said. ‘’We’re hoping Congress and the White House too, and the Treasury, will continue those discussions to get the balance right.’’

Ms Bair said that ending the philosophy that some financial institutions are ”too big to fail” was the most important financial reform to make, and suggested that her agency, which is responsible for taking over failing deposit-taking banks, has already played a key role in stabilising the system.

Her comments echo some of the concerns on Capitol Hill where senators from both parties are already questioning the wisdom of vesting the central bank with more powers.

Tim Geithner, US Treasury secretary has insisted that the Fed was the “best positioned” regulatory body to guard against the risk that a large institution could pollute the entire financial system.