August 18, 2022
REUTERS/DAVID SWANSON

Economist: Democrats surround big US banks

“Power Acquisition.” “Attempt to politicize our regulators for their own benefit”. “Serious destruction of organizational rules.” Rhetoric all around Washington Recalls the criticisms leveled at Former President Donald Trump Controversial reactions to issues ranging from border security to pollution control. This time, it was the Republicans who threw the bar Democrats Nowadays, focusing on one thing that may seem uninteresting at first glance: Federal Deposit Insurance Corporation (FDIC)), The company accused of protecting the American economy from bank failures.

As hot talk suggests, there is actually a lot of risk. In addition to securing bank accounts, The FDIC Bank is one of the companies that recognizes affiliates To us. This makes her a decisive agent in government programs. பிடன் Strict rules should be imposed on the financial system. Democrats have now taken full control of the body after a devastating war at council meetings.

Democrats already have three-fifths of the five seats on the FDIC panel, which, in principle, should allow them to do what they want without worrying about opposition. But the head of the company was still there Jelena McWilliams, Honorary Advocate appointed by Trump. She had the power to set the agenda for meetings. Democrats say he used it to block a policy review for bank mergers – which he denied.

The controversy erupted last month when two Democrats, including Rohit Chopra, director of the US Consumer Financial Protection Bureau, tried to avoid Jelena. They declared that without his support, a majority of Democrats voted to amend the rules for bank mergers. Jelena responded by opposing the legitimacy of the vote. In an article published in Wall Street Journal, Accusing them of being “hostile acquisitions by the FDIC”. On December 31, the board split and the deal was unlikely to happen, with Jelena announcing her resignation.

Conflict

The conflict is a visual representation of the Democrats’ ongoing efforts to make their mark on the institutions that oversee the US economy. Chopra is an ally of Elizabeth Warren, a pro-left Democratic senator. Those closest to Elizabeth – especially Lina Khan, chair of the US Federal Trade Commission; And Gary Zensler, Chairman United States Securities and Exchange Commission (Securities and Exchange Commission, SEC) – also holds important positions.

But the progressives did not win every fight for power. Democrat Saule Omarova, the Democratic nominee, wanted to run for office as a bank regulator and withdrew from the race in December after Republicans publicly criticized him as an “extremist”.

Renaming Jerome Powell as head of the Federal Reserve (Fed, US Federal Reserve) Another disappointment for the Democratic Left. However, with three seats on the central bank’s board, progressives may still have a presence in US monetary power. In addition, Biden is expected to nominate Sarah Bloom Ruskin, another preferred candidate for Senator Elizabeth Warren, as vice president of Fed oversight, the most important regulatory position in the financial system.

Goals

What do the progressives want to achieve? It is already clear that they want to control the tech giants. The debate in the FDIC reveals that they also intend to restrict the creation of large banks. For now, policy review for bank mergers is only a request for information. But the questions Chopra asked in a blog post in December were the slightest doubt as to where he wanted to go: “Should we allow expansion by acquiring financial institutions that routinely violate consumer protection laws? (…) How do we ensure that a merger does not increase the risk that a bank will be too large to fail? ”.

Many financial analysts prefer the idea of ​​forming groups of middle American companies to compete with the “big four”, which is used to refer to the four largest banks in the United States (JP Morgan Chase, Bank of America, Citigroup and Wells Fargo) Progressives will argue that this will push things backwards. If the power of the giant banks affects financial stability, creating bigger banks than them will make the situation worse, a government official said.

Other possible changes include incorporating global warming concerns into the financial system and tightening some of the capital requirements of companies. Democrats, as always, must overcome legislative and campaign barriers to accomplish all of this. But now that the FDIC is firmly in your hands, the path is a little clearer. Translation of ROMINA CACIA

Agencies are at risk

Federal Deposit Insurance Corporation (FDIC)

Created in 1933, after the 1929 crisis, the company guarantees deposits in financial institutions. It has functions similar to the Credit Guarantee Fund (FGC) in Brazil. President-elect Jelena McWilliams, nominated by Trump, resigned following pressure from Democratic advisers.

Consumer Financial Protection Agency (CFPB)

Responsibility for guaranteeing consumer rights in the financial sector. It was created in 2011 in response to the 2008 financial crisis. It is headed by Rohit Chopra, an ally of Democrat Senator Elizabeth Warren.

Currency Regulator Office (OCC)

The agency, which is affiliated with the Department of the Treasury, is responsible for overseeing and regulating the operations of approximately 1,200 national private banks. The appointment of the head of the organization provoked conflict between Democrats and Republicans.