Consistent with the Clinton Administrations general position Allow banks to set

Consistent with the clinton administrations general

This preview shows page 4 - 6 out of 10 pages.

- Consistent with the Clinton Administration’s general position - Allow banks to set up subsidiaries that could undertake any activity “incidental to or within the business of banking” (real estate, computer services, insurance, securities) - Allow banks to own 51 percent of the operating subsidiaries compared with 80 percent now, making it easier for banks to form joint ventures with other companies - Make it easier for banks to expand across state borders by allowing them to install automated teller machines anywhere in the country without receiving regulatory permission (machines would have to provide full access to accounts at many banks) iii. Why do you think the OCC proposed them? What are the reasons suggested in the article? Which do you believe? The OCC likely proposed them to prevent banks from switching to state charters to take advantage of the fact that state regulators were more lenient in allowing banks to expand into other businesses. It has been losing commissions fees as banks switch, which are important to pay salaries. The OCC says the change is aimed to continue its push to improve the efficiency of the agency (says that it is to eliminate some paperwork and have time to analyze policy issues raised by bank diversification). Earlier that month the agency lowered many regulatory fees and begun loosening regulations iv. What light does all this shed on the question of whether regulatory centralization is a good or bad thing? What are the arguments for and against? ARGUMENTS FOR Centralization is good in that it prevents banks from shopping around for appealing regulations and prevents regulators from competing in a race to the bottom for the commissions from these banks. It also imposes uniform standards and prevents duplication of examination and rules. Reducing these incentives could also reduce risks to taxpayers by limiting the chance that insolvent financial institutions will have to be bailed out at taxpayer expense. - Remove duplicative regulatory responsibilities as agencies improve communication with one another
Image of page 4

Subscribe to view the full document.

- Remove incentives for financial supervisors to compete to attract clienteles of regulates institutions by weakening their rules and standards - Reduce risk to taxpayer by limiting the chance that insolvent financial institutions will have to be bailed out ARGUMENTS AGAINST However, centralization of decision making makes it more likely a single bad decision could ripple out from one industry to harm the entire financial system. Concentration of power makes it easier for big businesses to sway regulators - regulatory capture, where agencies serve businesses and not the consumers, is easier with fewer people to sway. The new regulation grants regulators discretion to set rules on an ad-hoc basis and pushes the United States even further from a rules-based system, which decreases certainty and predictability. Centralization removes the stability that could emerge from a system where multiple regulators operate on nearly equal footing and
Image of page 5
Image of page 6

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes