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Smith
Faculty Opinion Article
The 30
Seconds Outlook
April 1, 2009
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“. . . [I]n the end, Wall Street and Main Street are in
this together. The people on Main Street can’t survive without a functioning
finance system.”
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— Alan
Murray, Wall Street Journal,
March 30, 2009 |
The financial and banking crisis has finally made it clear to the private and
public sectors that improved regulation across the board is required. This
regulatory upgrade should include several elements: First, most importantly,
security and market loan risk must be priced and transparent to all market
participants and regulators. Second, the Fed should be made responsible for an
on-going system of “stress testing” banks, thrifts, and major non-bank financial
institutions to ensure the integrity, safety and soundness of the financial
system. The tests should employ a comprehensive set of standards, including
risk-adjusted capital requirements. The Fed’s “independence” makes it the best
choice for this task to avoid political interference. Third, the inept Office of
Thrift Supervision should be closed and its thrift oversight and audit functions
transferred to the FDIC. Fourth, the FDIC should also replace the Office of
Comptroller of the Currency as supervisor and auditor of national banks. A
consistent across the board oversight of banks and deposit institutions should
be implemented. (more to follow)
John A. Haslem
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