REMARKS
BY
DON POWELL
CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
BEFORE THE
CONFERENCE ON BANK STRUCTURE AND COMPETITION
FEDERAL RESERVE BANK OF CHICAGO
CHICAGO, IL
MAY 10, 2002
It is great to be in Chicago and I appreciate the opportunity to speak to you today. This
conference has contributed much to the development of good banking policy over the
years and it is indeed an honor to be with you.
This is my first time at the Bank Structure Conference. I'm the new kid on the block, but
I do know the FDIC has benefited from the work you've done. As many of you
remember, Chairman Tanoue came here two years ago and talked about deposit
insurance reform. Last year, that topic was again on the agenda as the FDIC moved
toward firm legislative recommendations.
Today, we have a bill moving in Congress, a broad consensus on many of the issues,
and a lot to be proud of. I know we have a ways to go, but momentum is on our side
and I want to acknowledge all this conference has contributed to the deposit insurance
reform effort.
Today, I want to focus my remarks on how we can improve our efficiency and
effectiveness as regulators. And I want to offer some of my observations after eight
months on the job as Chairman of the FDIC.
Prior to my current role, I was a banker. As such, my focus was necessarily on growing
my business. Dealing with regulators was an unavoidable and necessary consequence
of engaging in the business I love. There was a healthy tension between us and that is
how it should be. We both made mistakes from time to time, but respect was mutual
and the relationship was productive. The debate about who regulated what - and how it
all got done - was a Washington issue and pretty far removed from my day-to-day
business.
When I came to Washington last August - and to the other side of the table, so to speak
- I found the situation more complex than it seemed from my previous vantage point in
Amarillo, Texas. Four supervisors, two federal chartering agencies, a central bank, a
deposit insurer and a number of state supervisors are all working within a confined
space to do a very demanding job.
BY
DON POWELL
CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
BEFORE THE
CONFERENCE ON BANK STRUCTURE AND COMPETITION
FEDERAL RESERVE BANK OF CHICAGO
CHICAGO, IL
MAY 10, 2002
It is great to be in Chicago and I appreciate the opportunity to speak to you today. This
conference has contributed much to the development of good banking policy over the
years and it is indeed an honor to be with you.
This is my first time at the Bank Structure Conference. I'm the new kid on the block, but
I do know the FDIC has benefited from the work you've done. As many of you
remember, Chairman Tanoue came here two years ago and talked about deposit
insurance reform. Last year, that topic was again on the agenda as the FDIC moved
toward firm legislative recommendations.
Today, we have a bill moving in Congress, a broad consensus on many of the issues,
and a lot to be proud of. I know we have a ways to go, but momentum is on our side
and I want to acknowledge all this conference has contributed to the deposit insurance
reform effort.
Today, I want to focus my remarks on how we can improve our efficiency and
effectiveness as regulators. And I want to offer some of my observations after eight
months on the job as Chairman of the FDIC.
Prior to my current role, I was a banker. As such, my focus was necessarily on growing
my business. Dealing with regulators was an unavoidable and necessary consequence
of engaging in the business I love. There was a healthy tension between us and that is
how it should be. We both made mistakes from time to time, but respect was mutual
and the relationship was productive. The debate about who regulated what - and how it
all got done - was a Washington issue and pretty far removed from my day-to-day
business.
When I came to Washington last August - and to the other side of the table, so to speak
- I found the situation more complex than it seemed from my previous vantage point in
Amarillo, Texas. Four supervisors, two federal chartering agencies, a central bank, a
deposit insurer and a number of state supervisors are all working within a confined
space to do a very demanding job.
It did not take me long to get educated about some of the age-old tensions that exist
between the different supervisors. At the FDIC, issue number one was the question of
backup authority. The OCC was concerned about funding. And the OTS was embarking
on a tough era of cost-cutting and downsizing. Interagency policy making was full of
process and discussion, but the momentum needed for timely collective decisions was
often difficult to achieve. With respect to policy development, our current system
sometimes defines the old adage about too many cooks in the kitchen. We might not be
spoiling the broth, we are certainly spending more time than we should debating about
the recipe.
As I have observed the process over these past few months, I keep coming back to
some fundamental questions. Does the current arrangement make sense for today's
banking environment? Can we improve our operating efficiency? Can we deliver policy
in a more timely manner? Can we preserve what is valuable about the current system
while saving the industry some money and doing a better job as charterers, regulators
and insurers?
We ought to be talking about these things. It is troubling to me that politics or questions
of Washington turf often inhibit a candid discussion of these issues - and perhaps would
even inhibit reform. Unlike the banking industry, we have the luxury in Washington of
extensive discussion and inaction because we do not have the marketplace to discipline
us. Instead, we must discipline ourselves. The longer inefficiencies persist in our
regulatory structure, the more we risk losing the trust of the public and the respect of the
industry we regulate.
I don't want this to happen on my watch, so I am going to ask these questions.
But let me be clear: we should not go about this willy-nilly. That is why I am starting a
conversation today, not proposing a solution. As we look at these issues, we should
take care to preserve the strengths in the current system.
Let's discuss a few of those. We should strengthen and preserve the dual banking
system. We should preserve supervisory, policy, and regulatory independence. We
should continue to add value and stability to the American financial services industry.
We should not discourage the entrepreneurial spirit. We should understand and
respond to the risks and imbalances in the system. We should be vigilant about the
impact of economic events - including fiscal and monetary policy - on the banking
business and provide the industry with our concerns and our analysis in a timely
manner.
These are all hallmarks of the American bank regulatory structure. We are very good at
some of these things. We need to improve on others. But none of these should be
threatened by a good discussion about how we are organized.
between the different supervisors. At the FDIC, issue number one was the question of
backup authority. The OCC was concerned about funding. And the OTS was embarking
on a tough era of cost-cutting and downsizing. Interagency policy making was full of
process and discussion, but the momentum needed for timely collective decisions was
often difficult to achieve. With respect to policy development, our current system
sometimes defines the old adage about too many cooks in the kitchen. We might not be
spoiling the broth, we are certainly spending more time than we should debating about
the recipe.
As I have observed the process over these past few months, I keep coming back to
some fundamental questions. Does the current arrangement make sense for today's
banking environment? Can we improve our operating efficiency? Can we deliver policy
in a more timely manner? Can we preserve what is valuable about the current system
while saving the industry some money and doing a better job as charterers, regulators
and insurers?
We ought to be talking about these things. It is troubling to me that politics or questions
of Washington turf often inhibit a candid discussion of these issues - and perhaps would
even inhibit reform. Unlike the banking industry, we have the luxury in Washington of
extensive discussion and inaction because we do not have the marketplace to discipline
us. Instead, we must discipline ourselves. The longer inefficiencies persist in our
regulatory structure, the more we risk losing the trust of the public and the respect of the
industry we regulate.
I don't want this to happen on my watch, so I am going to ask these questions.
But let me be clear: we should not go about this willy-nilly. That is why I am starting a
conversation today, not proposing a solution. As we look at these issues, we should
take care to preserve the strengths in the current system.
Let's discuss a few of those. We should strengthen and preserve the dual banking
system. We should preserve supervisory, policy, and regulatory independence. We
should continue to add value and stability to the American financial services industry.
We should not discourage the entrepreneurial spirit. We should understand and
respond to the risks and imbalances in the system. We should be vigilant about the
impact of economic events - including fiscal and monetary policy - on the banking
business and provide the industry with our concerns and our analysis in a timely
manner.
These are all hallmarks of the American bank regulatory structure. We are very good at
some of these things. We need to improve on others. But none of these should be
threatened by a good discussion about how we are organized.