In recent Senate debate, Banking Committee Chairman Donald W. Riegle, D-Mich., blasted President Bush's recently proposed bill to relieve banks from burdensome regulations. Excerpts follow:
We are in the middle of the worst banking crisis since the Great Depression. But the President's latest response is to promote forbearance on failing institutions and elimination or weakening of safeguards against unsound or fraudulent activities - provisions he personally agreed to and signed into law just last December.
[Last spring,] we had the worst urban riots in a generation. Those riots came only a few months after the Federal Reserve released the first comprehensive data showing that lending discrimination is a reality for millions of Americans. The President's response - to weaken the Community Reinvestment Act - would be a stunning reversal in policy.
Eroding the '91 Banking Law
But the President's bill would be even more harmful. It would weaken important consumer protections, eliminate reporting requirements that promote better understanding of our banking system and our economy, and eliminate requirements for annual, on-site examinations by federal banking examiners of our nation's banking system - a cornerstone of the reforms enacted just months ago.
Put bluntly, the bill takes some of the core provisions of last year's banking bill and guts them. It leaves in place the part where the American people loan tens of billions of dollars to the banking industry. But it scraps many of the key reforms needed to protect that taxpayer loan and ensure that it will be repaid on time and in full.
Why has the President put his stamp on this piece of legislation? He says it is to relieve burdens on banks. He says all the regulations this bill would undo place excessive costs on banks.
Are Costs Worth the Benefits?
We need to think about that assertion very carefully. What are we buying with these costs?
The answer is, we are buying a tremendous amount. Arguably, we are buying the very stability that makes it possible for the banking industry to survive its present crisis.
There is a price for that stability. The revised and stronger deposit insurance system costs more than the old one that went broke - but no more so than is necessary to do the job.