There will be a hearing tomorrow that will help shape how banks are broken up or thought of as posing a risk to the economy. What gets decided, not just tomorrow, will truly shape how regulatory reform moves forward in this country. We at ANWF think it's important the public is a part of the discussion. Our discussion on systemic risk is just as important and we need to make sure they hear us. The House Financial Services Committee will hold a hearing titled "Systemic Regulation, Prudential Matters, Resolution Authority and Securitization" on Thursday, October 29, at 9:30 a.m.

The way I see systemic risk is this: I don't care how innovative and new your product is if it's mostly based on air and fluff (speculation) then it's not innovative or useful and if a large enough percentage of your portfolio is made up of that fluff and your company is growing disproportionately larger than 90%+ of the rest because of that fluff, and you're large enough that you're extremely interconnected with many parts of the market equal to your share in the market, then you're a systemic risk poser. Numbers could be put to all of these parts and set as limits. The limits will be clear and not subjective. And then, there is the question of bailouts, if you're bigger than $100 billion in assets, you're going to get a bailout from a Democrat or a Republican, so you better not be bigger than $100 billion.

Here are the panelists on the hearing who will help make arguments for who should or should not be regulated and what systemic risk is. The issue of who needs to be watched over is muddled because there is a difference between small and large banks and small banks think they shouldn't be regulated further since they didn't cause the crisis. Though we're here to see greater competition in the industry, including helping small and medium-sized banks be even better servicers to the public, there's a strong reason why small banks should be watched over -- anyone can be collusive, create a problem, etc. It has been true that small and medium-sized banks have posed less of a systemic risk, make more community or small business loans, and have lower rates. Overall, they have been better for the average consumer. Small and medium banks should be watched over but treated differently, possibly regulated with lower requirements for how much cash on hand they must have per transaction/deposit and their systemic risk needs to be measured differently.

Notice that the first panel has one person -- Geithner. Not sure how panels have been broken up. According to members of the Americans for Financial Reform, a coalition we are a part of, Jane Dirista, Michael Menzies, and Trumka will most likely speak on the side of the public. We expect great things from Sheila Bair, Tarullo, and Dugan on panel 2.

Panel one

* The Honorable Timothy F. Geithner, Secretary, U.S. Department of the Treasury

Panel two

* The Honorable Sheila Bair, Chairman, Federal Deposit Insurance Corporation
* The Honorable John C. Dugan, Comptroller, Office of the Comptroller of the Currency
* The Honorable Daniel K. Tarullo, Governor, Board of Governors of the Federal Reserve System
* Mr. John E. Bowman, Acting Director, Office of Thrift Supervision
* The Honorable Thomas R. Sullivan, Insurance Commissioner of the State of Connecticut on behalf of the National Association of Insurance Commissioners

Panel three

* Mr. Richard Trumka, President, American Federation of Labor and Congress of Industrial Organizations
* The Honorable Richard Baker, President and Chief Executive Officer, Managed Funds Association
* The Honorable Phillip Swagel, Visiting Professor, McDonough School of Business
Georgetown University

* Mr. Scott Talbott, Senior Vice President for Government Affairs, The Financial Services Roundtable
* Mr. Steven A. Kandarian, Executive Vice President and Chief Investment Officer, Metropolitan Life Insurance Company
* Mr. R. Michael S. Menzies, Sr., President and Chief Executive Officer, Easton Bank and Trust, Co. on behalf of the Independent Community Bankers of America
* Mr. Peter Wallison, Arthur F. Burns Fellow in Financial Policy Studies, The American Enterprise Institute
* Ms. Jane D'Arista, Americans for Financial Reform
* Mr. Edward L. Yingling, President and Chief Executive Officer, American Bankers Association
* Mr. T. Timothy Ryan, President and Chief Executive Officer, Securities Industry and Financial Markets Association

• tiffiniy's blog
• Add new comment