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Now no time for big gov.

There continue to be a lot of questions about the economy, and many Americans are rightfully frustrated. But increasingly, they are frustrated for different reasons.

While some are calling on the government to do “more and more,” a growing number are concerned about the federal government’s increasing involvement in the financial markets and private industry.

They are concerned, not because of a lack of good intentions on the administration’s part, but by the possibility of unintended consequences that could make a bad situation worse.

A case in point is the president’s proposal to create a Consumer Financial Protection Agency. On the surface, this may sound like a good idea – after all, the intent would be to strengthen oversight over loans, mortgages and other financial product services in order to protect consumers.

But the reality could be very different. Consumers could see fewer choices and higher prices for financial services, and a new level of regulation could hamper the progress being made by banks and other institutions in recovering from an economic collapse they didn’t cause.

Quite frankly, now is not the time to create another layer of bureaucracy, especially one that will dramatically affect financial institutions that had virtually no role in the current crisis. A case in point is that, by the White House’s own admission, 94 percent of the subprime loans at the center of the real estate market collapse were made by non-bank institutions. The complicated financial instruments created to spread the risk of mortgage-backed securities were created by large Wall Street investment firms, not your local community banks.

Nevertheless, it is these very banks that will carry a large burden under this new agency – a burden that will have a negative impact on their abilities to make loans, extend credit and provide other services that will help small businesses and consumers recover and boost the economy.

Currently, there are as many as seven agencies (six federal and one state) that have some regulatory control over banks and financial institutions in Tennessee, including the Federal Deposit Insurance Corporation, the Federal Reserve and the state Department of Financial Institutions. The administration’s proposal to create a new bureaucratic agency to take over the consumer protection responsibilities of all of these agencies will essentially create a parallel regulatory system that will take government intervention in the market into new, uncharted territory.

It could severely disrupt whatever progress we are making toward economic recovery.

Tennessee banks agree that effective regulation protects the consumer and financial institutions; but any kind of reform should come within existing structures, and it should be well-thought-out. One of the biggest concerns among Tennessee bankers is that there is a headlong rush on the part of the administration to pass this legislative proposal quickly. We think that would be a mistake.

The Tennessee Bankers Association urges Congress to slow down, to deliberately consider all of the ramifications of creating yet another federal agency that will reach even further into the private sector. Instead, let’s take a look at how regulation and oversight can be improved within the existing agencies.


Bradley Barrett is president of the Tennessee Bankers Association.


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