The U.S. has become an intensely and dangerously divided nation. At a time when partisan voters are threatening to punish their representative in Congress if they cooperate with members of the opposing political party, I believe it is essential that we look for common ground to rebuild the trust needed to unite us once again and to move America forward.
I believe one such opportunity is the plan to grant national bank charters to financial technology firms.
As the Office of the Comptroller of the Currency moves forward to grant national bank charters to fintech companies, unity of purpose could be achieved by stepping back to consider the broad policy goals that Democrats and Republicans typically seek in regulating and supervising financial services markets and businesses.
Republicans are right that market competition will yield lower prices and better products, improving the lives of all Americans. Democrats are right that a national regulatory framework is key to promoting that sort of healthy competition from coast to coast.
Both Democrats and Republicans want to address the financial needs of smaller Main Street businesses. Both parties understand that small and midsize businesses are the ones creating the jobs of the future. Both Republicans and Democrats prefer simplicity over complexity.
The OCC charter would do these things and more. By clarifying the national regulatory framework, as well as providing a stamp of approval of a strong regulator, a national bank charter would promote greater capital formation and liquidity that will help improve prices for borrowers up and down the income and credit spectrum.
Democrats and Republicans likewise should both focus their attention on the fact that the OCC will provide strong supervision and hands-on government oversight of the financial sector. They should emphasize policies that promote transparency, consumer protection and financial inclusion.
The OCC meets these tests. Eliminating the Office of Thrift Supervision under the 2010 Dodd-Frank Act eliminated the “regulatory arbitrage” opportunity that previously existed when firms could choose between the OCC and OTS. A strong OCC should give Republicans and Democrats a means to encourage safe innovation that benefits small businesses, creates good jobs and saves consumers lots of money.
Concern for abuse of this charter by unscrupulous actors is legitimate and is best addressed by continuing to allow state regulators and attorneys general to enforce civil and criminal laws against fraud and unfair and deceptive practices, while consolidating supervision in a single strong agency at the federal level.
A charter is a perfect example of retaining significant state authority made possible by clear and simple federal rules. This federal-state partnership will produce strong governance and controls on a national scale through the supervisory process. It is the only way to achieve uniform requirements across all 50 states. Maintaining a costly, complex and time-consuming state licensing process while at the same time requiring companies to satisfy federal mandates will kill off a job-creating pro-consumer innovation.
Finally, Americans were outraged by the need to bail out our biggest banks in 2008. They still worry that the “too big to fail” policy is implied in current federal law. Taxpayers should know that new fintech companies typically are not relying on taxpayer-backed FDIC deposit insurance for funding. Instead, risk-seeking investors in fintech firms provide capital to needy borrowers and businesses without implicating the federal safety net.
Not only does the OCC charter avoid the risk of another “too big to fail” bailout, but it eliminates the current policy that new entrants may be too small to succeed.
In the past decade, fintech firms have proven that they can deliver for customers, despite being burdened by an uncertain regulatory framework. Delivering superior products and services to customers that traditional financial institutions have not been focused on has been key. With a federal charter, Democrats and Republicans can harness the benefits of fintech firms for those consumers and businesses, while ensuring that such growth is responsible and new businesses practices are transparent.