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A Comment on Regulatory Reform - 7-7-09
Well… I have written
enough about the TARP, and there is much more to talk about as new challenges
emerge for the US economy. The news from
Washington is
trying to convince us that the economic downturn is slowing. Although I am sure that those who are among
the double digit un-employment are having trouble seeing the light at the end
of this tunnel.
However, I would like to devote this letter to you concerning
regulatory reform. The administration
has published their 88 page proposal on regulatory reform titled “Financial
Regulatory Reform: A New Foundation”.
After reading the proposal from front to back several times,
I have a few comments I would like to share with you:
First -- this proposal is the first
shot across the bow for a well entrenched bureaucratic system that has become
morbidly flawed.
Second -- after the first
day of publication the opinions were flying from the existing regulators,
legislators, and trade groups all supporting their particular programs or
issues.
Third -- this proposal
will undoubtedly look very different by the time it gets to Congress for
approval.
I have my own opinions regarding several of the proposals
within the publication. I am even in
disagreement with the American Bankers Association (I know its heresy to
disagree with the ABA)
but I see some of these issues from a different perspective.
I am not going to politic my issues on this subject, but
suggest that we all look at this from the global perspective. I think that most of us can agree that the regulatory
system needs some help. This was
evidenced by the financial events of the past two years, i.e. AIG, Madoff,
Countrywide, IndyMac, etc. The
regulatory agencies, SEC, OCC, OTS, FDIC and the FED have all had a part in these
events that cost the 401(k)’s over two trillion dollars. These actions did not put enough people in
jail and contributed to the double digit un-employment.
In a democracy it is almost impossible to get a 100%
consensus on any issue and it is expected that self interested parties will
work to promote their own agenda. However,
at a time when so much is broken and the confidence in the financial system is
so weak, I think that we should look at this proposal with an unbiased eye
towards developing a better system. I am
not proposing that we act like sheep; nevertheless, I submit to you that those
who are screaming foul the loudest over this proposal are the same status quo that
helped get us where we are today.
As a community banker for over 25 years, I have seen the
industry develop into a very complex system that has dramatically increased
enterprise risk. I do think that the
regulatory system has not kept pace with all of these changes. So, let’s look at this proposal as not being
perfect but as first steps to provide Americans and the world financial markets
with a better system.
Malcolm F. Hotchkiss
President and Chief Executive Officer
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