March 31, 2008
Too Big To Succeed? Washington Weighs in on Paulson's Plan
Posted by David Zaring

The Washington Post reports on opposition to the big financial institution reorganization.  Is this thing already dead?

Maybe, but the jury is still out.  As we told you yesterday, bureaucratic reorganizations turn on the ability of affected agencies to mobilize the lobbyists of regulated industry and, to a lesser extent, the chairs of affected congressional committees.  Today, the Post says that "[f]ew leaders of these agencies -- and the associations that work with them -- welcomed such radical transformation."  (It also says that "[b]efore the plan takes hold, however, lawmakers would have to sign off. This would be a challenge given that the CFTC and the SEC report to two different congressional committees, setting up the prospect of a turf battle.")  But other than the American Bankers Association, no industry group was willing to go on record opposing the plan - even though regulators from the CFTC, FDIC, and NCUA did.   In fact, the hedge fund and securities industry lobbyists expressed cautious support for it.

We disclaim political expertise at the Glom, but to our untrained eyes, much of the fate this plan depends on whether it means the end of the credit union.  Thrifts, especially now that they look exactly like banks, fine.  State-chartered banks, ditto, okay.  But credit unions?  Consumers, voters, and unaligned Congresspeople love their credit unions.

The Fed, by the way, is telling the Post that it would be sharing just a bit of the reorg pain, giving up its banking supervisors to the new financial institutions supervision agency.

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