By Linda McGlasson
March 20, 2009
Federal regulators testified on a number of banking and regulatory
issues on Capitol Hill on Thursday – including the potential
re-organization of the regulatory agencies themselves.

Top of mind topics for the entire industry were laid out in
testimony from Comptroller of the Currency John Dugan, who spoke to the
Committee on Banking, Housing and Urban Affairs on the restructure and
reform of the financial regulatory system. His and other testimony
comes after a week of heated talk surrounding the AIG bonuses and
Fannie Mae bonuses being given out during great financial turmoil and
economic recession.

Dugan says OCC supports establishing a systemic risk regulator,
most likely the Federal Reserve Board. He cautioned, though, not to
concentrate too much authority in a single government agency. OCC also
supports stabilizing and winding down non-banking entities that hold
great systemic risk, such as AIG. OCC sees that new regulatory
structure should have tools and oversight of these types of entities
similar to what the FDIC has for resolving bank failures.

His testimony comes at a time when lawmakers are considering
regulatory reform that may include the restructuring of the federal
banking agencies and what agencies hold oversight responsibilities of
banks and credit unions.

Dugan also adds that if reduction of banking regulators happens,
the OCC recommends a role of a dedicated prudential banking supervisor
that does nothing but bank supervision, but also leave space for the
Federal Reserve to step in on a supervisory role because of its
experience with capital markets, payment systems and the discount

Dugan also stressed that Congress should establish national
standards for mortgage regulation. He also says best way to implement
consumer protection regulation of banks is through continued
supervision of banks and corrective action against compliance weakness
and failure.

Testimony by FDIC’s Division of Research director Arthur Murton to
the Subcommittee on Financial Institutions addressed the current issues
in deposit insurance. Morton outlined the reasons why the FDIC’s board
increased the deposit insurance premiums and reasons why those
increases should be made permanent.

Similar testimony was given by NCUA’s executive director David
Marquis to the Senate Banking, Housing and Urban Affairs committee on
NCUA’s deposit insurance arm, NCUSIF. Marquis says the $250,000
insurance protection should be made permanent and the NCUSIF
replenishment be extended to 5 years and its borrowing authority
increased, as well as the need to give system risk authority to the

NCUA Chairman Michael Fryzel spoke to the Senate Banking Committee
and called for the preservation of the independence of NCUA and NCUSIF,
saying it benefits consumers to have cooperative alternatives in the
marketplace. Fryzel also called for unique and distinct regulation of
the credit union industry.

The NCUA’s Sheila Albin, associate general counsel for the credit
union regulator, testified before the House Financial Services
Subcommittee on Financial Institutions and Consumer Credit on
legislation designed to aid consumers. She says the NCUA has the proper
controls and oversight in place to insure against abuse of consumers by
credit card issuing institutions. The two laws were written to stop or
restrict unfair, deceptive and anti-competitive consumer credit card
practices. Albin cites as proof a study by the Woodstock Institute that
showed federally-insured credit union card products tended to have
fewer fees, lower fees and clearer disclosures.

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