Wells Fargo chief Jon Stumpf yesterday publicly joined that opposition to the plan to empower a single regulator to oversee risk-taking by banks. Sheila Bair penned an op-ed in the New York Times announcing her opposition.
“I think that’s a mistake,” Stumpf said in an interview broadcast yesterday on Bloomberg Television. “You could get the benefit of a systemic regulator and also the benefit of differing points of view in a council.”
Bair had called for the monitoring and failure resolution powers of a systemic regulator to be shared by a council of regulators. She argued that a council would allow regulators with differing expertise to operate together and would prevent big banks from capturing the regulatory structure by having too much sway over one agency.
Supporters of a single regulator worry about “regulatory shopping,” where financial companies seek out the loosest regulatory regime. This, in turn, might create a “race to the bottom,” where regualtors compete with each other to attract companies to come under their supervision by lowering regulations. What’s more, empowering a single agency would create more accountability. We’d know who to blame when things went wrong.
There is something very perverse, however, about expanding and centralizing the powers of a regulatory agency in light of the massive regulatory failures that contributed to our decline. The problems of the various regulators was not a lack of authority–it was a lack of foresight and knowledge. Regulators just didn’t understand what was happening. And this knowledge problem is made more likely by centralization rather than less.