If we were to take a Jay Leno like “walkabout” and ask the average person on the street what’s important about current events in the regulation of the banking industry, we’d likely get blank stares from the vast majority of those questioned. After all, the average Jane/Joe, or Karen, just doesn’t pay attention to the banking industry, much less its regulation and, frankly, doesn’t care unless they’ve been wronged, or if they fear the failure of their bank and the possible loss of their money.
The average American simply places their funds on deposit with FDIC insured banks, transacts their business, borrows, makes payments, and leaves the rest to the banking system to move money among, and outside, the system and invest in consumers, businesses, communities, and infrastructure in support of the greater American economy. The system generally does this well, but for periodic lapses of prudence and lingering lapses of fairness. Currently, the system is privately directed with both real and implied government back-stops to endear needed trust.
The U.S. government regulates the system to ensure its safety and soundness and to ensure that laws and regulations are followed. When safety and soundness and compliance lapses do occur, potentially endangering individual banks or the system itself, harming consumers or classes, or risking national security, the government steps in to correct the issues to ensure the system continues to operate and serve the American economy.
For the most part, the government lets the system work things out for itself and avoids government interference, or control. The government serves as a check and balance on the system, and the system serves as a check and balance on itself and, at times, the government.
So, given the foregoing, why should the average American care about current events in the regulation of the banking system? Because current events and partisan political winds have a great chance of radically changing the American banking system with envisioned levels of government control never-before seen in the free market-based U.S banking and financial services sector. Some of the winds currently gaining pace take the form of government nudging, encouragement if you will, regarding societal issues, namely diversity, financial inclusion, and climate change; all noble and righteous causes. That said, the current political winds are blowing increasingly intolerant of the system’s handling of these issues (what is being done and the pace at which its done) and it appears these political winds are producing partisan regulatory appointees and attendant agency approaches that will quickly lead to regulators moving quickly from encouraging to enforcing their political will on banks and citizens.
The poster child for this new world order in banking is the current administration’s nominee for Comptroller of the Currency, Saule Omarova. The current nominee is, without doubt, the most radical nominee for that office in history. Her ideas, such as taking all consumer banking deposits from the private sector and placing them on the books of the Federal Reserve in combination with the formation of a National Investment Authority, a new government agency that would act directly in the financial markets to “allocate” both public and private capital to fight “social ills” reeks of nationalization and government directed credit and investment allocation.
While there have always been partisan agendas in the appointment of Comptrollers (conservative, liberal and progressive), these ideas are none of the above. They are authoritarian. Government in control of your money and what it is used for, perhaps leading to government in control of everything.
For years both socialist and communist countries have used nationalized finance and/or credit allocation to foster their economic and societal agendas. Before going down this road, the average American needs to decide if this is where they want the banking system and the country to go. Does the average American want to punt here and risk dismantling the free-market system that built America into an economic superpower? Does the average American want to cede the ability to define and resolve “social ills” solely to whatever administration is in power? Where have these ideas been implemented and what have been the results? It would seem these concepts fly in the face of freedom, government for the people by the people, and the principles of debate, collaboration and compromise that form the underpinnings of this country.
While there is no doubt that both the U.S. banking system and its regulation have room for improvement and change, whether to fight social ills, abate and reverse adverse climate change, or to more fairly serve and invest in people, businesses and infrastructure, the question must be asked: Can a potentially unchecked government do a better job than a regulated free market banking and financial services system?
The average American needs to pay attention to these current events and speak and vote with knowledge and conviction. We can’t sit idly by, watch these important events unfold, and follow like sheep. The average American need not be expert in banking or finance. That is not the issue here. The issue is one of ideology that may radically change the American banking system and the America that the founding fathers established at the outset. What every concerned citizen needs to do is call, or write, their representatives to let them know how they feel. There is still time to influence the future, but time is waning, and the intended functioning of our system and our country are at risk.
The following opinion piece has been contributed to Human Events under a nom de plume by an experienced and highly placed professional within the financial services industry. Conflict of interest restrictions preclude their offering it under their own name. The writer is known personally and professionally to the Editor who can vouch for their preeminent qualifications to contribute thoughts on the subject matter.
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