Bank Regulation. 18. Background. As with so many other things, it takes a crisis to get action on Capitol Hill (e.g. terrorism, Katrina, etc.) The Great Depression was a catalyst for all kinds of regulation, including that of corporations (Securities Acts of 1933, 1934 and the SEC)
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# of banks failed 3 in 2007
30 in 2008
148 in 2009
157 in 2010
92 in 201151 in 201224 in 20133 so far in 2014
See FDIC website for details http://www.fdic.gov/bank/individual/failed/banklist.html
It’s a Wonderful Life
Finally, the Banking Act of 1933, signed into law by FDR on June 16, 1933, approved national deposit insurance (Section 8 of the Act created the FDIC). The FDIC is run by a 5-member board chosen by the President
FDIC Chair since Nov/12
How Deposit Insurance Coverage Has Increased
The Financial Services Modernization Act, 1999 (also known as Gramm-Leach-Bliley Act)
Or simply the Financial Reform Act of Dodd-Frank ActThe stated aim of the legislation is:
“To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail", to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.”
Congressman Barney Frank, Democrat.
Senator Richard Shelby, Republican.
Senator Chris Dodd, Democrat.
The Act is 2307 pages and 16 chapters long. Still trying to figure out what it says. One of the shortest, user-friendly summaries I could find is linked here. Students should be familiar with these summary provisions.
4.1 Title I - Financial Stability Act ( create Financial Stability Oversight Council and Office of Financial Research to monitor systemic risk)
4.2 Title II - Orderly Liquidation Authority (extends liquidation authority beyond banks to other financial institutions)
4.3 Title III - Transfer of Powers to the Comptroller, the FDIC, and the FED (Enhancing Financial Institution Safety and Soundness Act) (streamline overlapping regulatory agencies, make $250,000 insurance limit permanent)
4.4 Title IV - Regulation of Advisers to Hedge Funds and Others (Private Fund Investment Advisers Registration Act) (regulate hedge funds for the first time, increasing investor min. wealth to $1 million, excluding home)
4.5 Title V – Insurance (Federal Insurance Office Act and Nonadmitted and Reinsurance Reform Act) (monitor insurance, except health, LT care & crop; previously, oversight of insurance was done strictly at the state level)
4.6 Title VI - Improvements to Regulation (Bank and Savings Association Holding Company and Depository Institution Regulatory Improvements Act) (limits speculative investments of banks to 3% of Tier 1 capital; prohibits proprietary trading (speculation) with depositor funds (Volcker Rule).4.7 Title VII - Wall Street Transparency and Accountability Act (regulate OTC derivatives, such as credit default swaps)4.8 Title VIII - Payment, Clearing and Settlement Supervision Act (gives Fed powers to monitor and supervise liquidity risk within banking system)4.9 Title IX - Investor Protections and Securities Reform Act (more disclosure, whistleblower protection and rewards, credit rating agencies, originators keep 5% investment in mortgage, shareholders approve executive compensation)
4.10 Title X - Consumer Financial Protection Act (regulate consumer financial products, controversial)
4.11 Title XI – Fed’s System Provisions (create vice chair, Congressional oversight of Fed’s lending)
4.12 Title XII - Improving Access to Mainstream Financial Institutions Act (make banks give low income $2500 microloans, & financial counseling)
4.13 Title XIII - Pay It Back Act (unused TARP funds go to deficit reduction)
4.14 Title XIV - Mortgage Reform and Anti-Predatory Lending Act (underwriting, origination, no prepayment penalties, regulation of interest-only/graduated payment & reverse mortgages, financial counseling, appraisers, valuation models, loan modifications, foreclosures, Chinese drywall)
4.15 Title XV - Miscellaneous Provisions (e.g. Mine safety & off-shore drilling safety)
4.16 Title XVI - Section 1256 Contracts (IRC Section 1256 on futures/options)