Obama Wants Big Banks To Pay More for Oversight
Friday, August 14, 2009
The Obama administration is pressing ahead with its broad overhaul of financial regulation by proposing to hike the fees big financial firms pay for federal oversight while easing the burden for smaller ones, officials said.
The new two-tiered, pay-for-regulation approach is intended to partly cover the costs of more vigorous bank regulation and a new consumer financial protection agency. It reflects the administration's view that large banks and lenders should pay more because they are more complex and expensive to regulate, a Treasury Department official said.
The new fee structure is part of the administration's effort to rework the relationship between Wall Street and Washington. Legislation is now before Congress, which is set to take up the massive regulatory overhaul in the fall.
But the plan has run into opposition from some Republicans and federal regulators who do not want to be stripped of their powers or merged into other agencies. In addition, industry officials have been working vigorously on Capitol Hill to block the creation of a new consumer protection agency. On Thursday, advocates for big financial firms warned that any higher fees imposed by the federal government may be passed on to consumers.
Even as administration officials sent reams of legislative language to Congress, they were still ironing out some details, including the new fee structure to fund many of the proposed regulatory changes, officials said.
Under the latest plan, any bank with more than $10 billion in assets would face an increase in fees from its existing regulator and the new consumer protection agency.
Financial firms with less than $10 billion in assets might see lower fees. Currently, such banks pay different rates depending on whether they answer to federal or state officials. Federally chartered banks pay more than firms supervised by state officials. Under the administration's plan, the federal fees would be lowered to match state rates.
Meanwhile, unregulated consumer financial firms, such as mortgage lenders, would have to pay for their oversight for the first time. Banks have long complained that these unregulated companies have a competitive advantage because they do not have to pay fees or answer to a federal supervisor. The administration's plan aims to level the playing field, officials said.
"We think the funding mechanism makes sense, though I understand not everyone in the industry is going to like it," said Michael S. Barr, assistant Treasury secretary for financial institutions. "The fee assessment is based on the risks and costs of supervision. The larger institutions require greater oversight, and in terms of consumers, they are reaching many, many more with more complicated products."
Industry officials from big firms called the uneven assessment of fees unfair.
"We think that it's outrageous to disproportionately and unevenly impose the cost of new regulation on the top banks," said Scott E. Talbott, the senior vice president of the Financial Services Roundtable, which represents the largest financial firms. The largest banks, he added, "should not be forced by the government to . . . pay the larger share of the funding costs of the [consumer financial protection agency] and regulatory oversight."
Not every industry official was unhappy with the proposal.
"It is important that community banks are not burdened with new fees," said Paul G. Merski, senior vice president of the Independent Community Bankers of America. "There are additional concerns with the proposed [consumer agency] as crafted, and community banks feel it would be unfair to bear the burden of onerous new regulations when they did not engage in the activities that caused the financial meltdown."