Financial Overhaul Moves Forward as AID Anger Continues
AIG
Norwalk Hour
Tait Militana
Boston University Washington News Service
3/19/09
WASHINGTON – In the face of outrage surrounding his role in legislation that allowed AIG to dole out millions of dollars in executive bonuses last weekend, Sen. Chris Dodd, D-Conn., moved forward Thursday on reforms to the country’s banking system, calling for federal oversight so never again will an institution be “too big to fail.”
Dodd said the Federal Reserve may have too many regulatory responsibilities to handle the addition of a systemic regulator to weed out institutions whose failure could cause larger damages to the financial system. Instead, he suggested the authority lie with the Federal Deposit Insurance Company, a government institution that backs deposits in member banks.
“If the events of this week have taught us anything, it is that the unwinding of these institutions can sap both public dollars and public confidence,” said Dodd.
In a hearing at the Capitol, the Senate Committee on Banking, Housing and Urban Affairs, of which Dodd is chairman, heard testimony from industry leaders seeking to reinvent the financial regulatory system. All seven witnesses said additional oversight of the financial industry is necessary though several differed in their opinion on how it should be done.
Joseph Smith, North Carolina commissioner of banks, said rather than having a purely federal regulator the authority should be split between state and federal supervision because it will provide more checks and balances.
“An appropriately coordinated system of state and federal supervision and regulation will promote a more effective system of financial regulation and a more diverse, stable and responsive system,” Smith said.
Opponents argued this may allow too many cracks for large, diverse corporations such as AIG to slip through without adequate regulation.
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