A Quiet Push On Regulation
There are two arguments about why the regulators and the government missed the financial crisis. One, that the regulations were gutted by corporate interests in both parties; two, that the regulators had all the oversight abilities they needed but simply looked the other way. Really it's a combination of both. Legislation like the Commodity Futures Modernization Act, and to an extent Gramm-Leach Bliley, did remove some of the regulations over the banks, certainly the SEC under Chris Cox and the Bush Administration actively resisted enforcement of any kind. So while I do believe we need a regulatory overhaul, simply enforcing the law with existing tools would improve our ability to manage the financial industry and the risk to the greater economy.
Therefore I'm excited to see, for example, Sheila Bair at the FDIC taking on Citigroup.
The Federal Deposit Insurance Corp. is pushing for a shake-up of Citigroup Inc.'s top management, imperiling Chief Executive Vikram Pandit, people familiar with the matter said.
The FDIC, under Chairman Sheila Bair, also recently pressed a fellow regulator to lower the government's confidential ranking of Citi's health -- a change that would let regulators control the firm more tightly.
The FDIC's willingness to take an increasingly tough position toward one of the nation's largest and most troubled financial institutions is setting up a bitter clash between regulators -- some of whom disagree with the FDIC's position.
It's completely within the purview of the FDIC to regulate Citi, and just this threat is enough to keep them and other banks more in line. Meanwhile, with respect to new regulations, the Obama Administration is floating an executive rule to appoint a Special Master for Compensation that would enforce laws passed during TARP:
The Obama administration plans to appoint a "Special Master for Compensation" to ensure that companies receiving federal bailout funds are abiding by executive-pay guidelines, according to people familiar with the matter.
The administration is expected to name Kenneth Feinberg, who oversaw the federal government's compensation fund for victims of the Sept. 11, 2001, terrorist attacks, to act as a pay czar for the Treasury Department, these people said.
Mr. Feinberg's appointment could be announced as early as next week, when the administration is expected to release executive-compensation guidelines for firms receiving aid from the $700 billion Troubled Asset Relief Program. Those companies, which include banks, insurers and auto makers, are subject to a host of compensation restrictions imposed by the Bush and Obama administrations and by Congress.
Wall Street has been anxiously awaiting more details on how the rules will be applied. "The law is confusing and a bit ambiguous, and so we're looking for certainty as to how to structure pay incentives," said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a trade association.
There's an excellent debate to be had over future regulations. But I think that we would be served perfectly just by making sure the laws on the books are enforced.