Word: fdic
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Dates: during 2000-2009
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...Dodd and Banking Committee ranking Republican Richard Shelby are handling the creation of a consumer-protection agency, something the banking industry strongly opposes. Senators Mark Warner of Virginia and Bob Corker of Tennessee are trying to figure out which governmental bodies - the Fed, the FDIC or a newly created entity - should have the power to dissolve and resell large banks that fail, an issue that has split not just the two parties but the Administration and top regulators. Senators Chuck Schumer and Mike Crapo are tackling new regulation for corporate governance that would try to impose checks on risk-taking...
Retail banks and investment banks have fundamentally different functions and thus different appetites for risk. Retail banks are low-risk ventures; their deposits are insured by the FDIC. Investment banking is more lucrative but involves greater risk. When these two businesses are placed under the same roof, the result is a severe conflict of interest...
This is the case because the investment banking division can use FDIC-insured funds from the retail-banking division to indirectly finance excessive risk-taking. The retail bank’s customers will not transfer their deposits to a safer institution because they know that the FDIC will compensate them in the event of a bank failure. This moral hazard encourages further mergers between retail and investment banks, which in turn begets more institutions that are “too big to fail.” When excess risk gets a conglomerate bank into trouble, the bill goes to?...
...worst-case scenario, Dodd wants the SEC and FDIC to continue to have the power to dissolve failed banks, while the Administration would give power over big banks to the Federal Reserve. Dodd will also unveil new rules for over-the-counter-derivatives trading, whereas Frank has put off dealing with derivatives reform until next year...
...Consumer Financial Protection Agency (CFPA). In this Dodd, Frank and Geithner agree that a single agency should not be responsible for both ensuring bank stability (read: profitability) and protecting consumers. The CFPA would have rule-making, supervisory and enforcement authority to hunt abuses in lending and fee-setting. The FDIC would continue to exist as an insurer of deposits, while the Fed would continue to control monetary policy and oversee national financial stability...