Fed Plan Would Have 2 Bank Regulators

The Federal Reserve Board, responding to a White House plan for a single bank regulator, on Tuesday laid out a plan to replace the four regulatory agencies with two that would add 7,000 banks to the Fed’s domain.

“Our plan is simple and straightforward and accomplishes the streamlining of the regulatory system without creating a monolith,” Fed Gov. John LaWare said.

But top Treasury Department officials rejected the plan--which was outlined by LaWare in a seven-page Fed proposal--saying it would be wasteful and could cause confusion.

The White House in November proposed merging the regulatory duties of the four agencies under a Federal Banking Commission, a plan that must be approved by Congress.

Fed officials blasted that idea, saying it would create a “monopolistic” regulator and hamper the board’s ability to deal with a crisis, such as a stock market crash.

They also said the Fed must have direct supervision over the movement of interest rates.

“We must have some direct involvement in the supervisory process,” LaWare said.

The Fed proposed that it oversee all state-chartered banks--adding most of the 7,000 institutions now regulated by the Federal Deposit Insurance Corp. It would continue to oversee bank holding companies and foreign banks.

The Fed currently regulates about 1,000 banks and about 6,300 bank holding companies. The Comptroller of the Currency, which regulates about 3,400 national banks, and the Office of Thrift Supervision, which governs about 1,700 thrifts, would be merged into one agency for federally chartered banks and thrifts.