Sen. Jack Reed, D-R.I., sent the Treasury Department and banking regulators a letter last week raising concerns over letting private-equity firms purchase failing banks.
In a letter to Treasury Secretary Timothy Geithner, Federal Reserve Board Chairman Ben Bernanke, Federal Deposit Insurance Corp. Chairman Sheila Bair and Office of Thrift Supervision Acting Director John Bowman, Reed cited the private-equity takeovers of Flagstar Bank and BankUnited and asked regulators for a consistent policy on whether such purchases make sense.
"I believe these activities represent another, particularly dangerous example of regulatory arbitrage whereby institutions and firms are shopping around a potentially risky activity until they find a regulator who will allow it," he wrote.
The Fed prohibits bank acquisitions by private-equity firms, but the OTS allowed the Flagstar and BankUnited purchases. The FDIC said last week it would soon provide policy guidance for private-equity firms looking to buy ailing banks.
Reed wrote that regulators should agree on a single approach.
