Bush administration is quietly seeking to
roll back oversight of the banking business
and the scandal-riddled securities market
through two pending proposals--a planned rule
change for the banking industry and a house
bill--that diminish the ability of states
to police banks and stock brokers.
plans are worrisome because the federal government
has been largely MIA when it comes to cracking
down on corporate crooks in the post-Enron
era. While the feds have grabbed headlines
with a few high-profile indictments, state
law enforcers--most notably New York Attorney
General Eliot Spitzer--are taking a far more
active role in purging Wall Street of con
artists and thieves.
by the Office of the Comptroller of the Currency,
the shakeup would nullify state banking laws
stricter than federal regulations. Headed
by John D. Hawke, Jr., a K-Street player who's
worked for Democrats and Republicans, the
OCC is a little-known regulatory backwater
but it wields a vast amount of power over
the nation's financial institutions.
to a notice in the Federal Register the new
rules could wipe out state civil and criminal
statutes covering lending, deposit-taking,
credit cards, checking accounts, escrow accounts
and "all [other] powers authorized" by federal
early October, officials from numerous states
issued a stream of scathing critiques of the
proposed rule changes.
sweeping proposal would preempt virtually
all state banking laws for national banks
and their operating subsidiaries, essentially
undermining the integrity of the recognized
dual banking system," wrote Thomas Curry,
Massachusetts Commissioner of Banks, in a
letter to the OCC.
plan, Curry noted, would keep states from
licensing or investigating local subsidiaries
of national banks or from monitoring "finance
companies, securities firms, mortgage lenders
and brokers and collection agencies." He says
Massachusetts has secured $5.8 million in
restitution for ripped-off consumers during
the past two years.
stock market cops fear the new regulations
will curtail their work. "We think it could
shield securities firms owned by banks from
state regulation," said Bob Webster, a spokesman
for the Washington, D.C.-based North American
Securities Administrators Association, which
represents state securities regulators.
and company are calling for more public input
into the rulemaking process--an echo of the
recent battle over media ownership at the
Federal Communications Commission.
the whole climate of corporate scandal, we
think it's time to strengthen, not weaken,
investor protections," he said. "We're the
early warning system. Investors naturally
turn to their state officials for help before
they call on Washington."
ongoing probe of possible fraud in the mutual
fund market, Webster pointed out, originated
with New York Attorney General Spitzer. Spitzer
also orchestrated a "global settlement" between
a dozen states and 10 prominent investment
banks accused of feeding bogus information
to mom-and-pop investors. In April, the banks
paid $1.4 billion--a new record--and agreed
to a host of reforms to make the case go away.
the West Coast, California Corporations Commissioner
Demetrios Boutris--who recently won a $6.5
million judgment against deceptive stock peddlers--also
is annoyed by the OCC plan. In a previously
unpublished October 6 letter obtained by In
These Times, the commissioner challenged
the proposal, saying the OCC "lacks the necessary
Congressional authority" to overrule certain
the OCC, spokesman Kevin Mukri played down
the controversy. He portrays the whole effort
as a simple attempt to untangle a mess of
overlapping and contradictory state and federal
banks operate in 50 states and you have 50
states passing consumer protection laws, some
very stringent, some not," Mukri told In
These Times. "This creates a uniform field.
"It's kind of like a housecleaning rule."
about criticisms leveled by the states, he
replied, "they're entitled to their opinions,"
and pointed out that the proposal is backed
by banking industry trade groups.
said his office has received more than 1,000
comments on the issue but has set no timeline
for putting the rules into place.
banking proposal looks suspiciously like another
Bush administration scheme: HR 2179, a House
bill introduced this session by Rep. Richard
Baker (R-La.) and supported by Rep. Michael
Oxley, (R-Ohio), Bush's point man on corporate
crime. The pending legislation is supposed
to beef up the anemic and long-under-funded
Securities Exchange Commission. But it, too,
would curb the power of states to combat stock
2179, which is currently idling but could
be revived, has drawn howls from state authorities
and consumer advocates, with Spitzer labeling
it "an absolute, outright betrayal of the
Thompson is a staff reporter with the San
Francisco Bay Guardian. Freelance writer,
James A. Thompson lives in Tucson, Arizona.
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