U.S. lawmakers could harm the financial system if they fail to give regulators money and power to implement the Dodd-Frank Act, Federal Deposit Insurance Corp. Chairman Sheila Bair told lawmakers at a hearing in Washington.
“The work they have ahead of them is considerable,” Bair said in testimony for the Senate Banking Committee. “Without proper funding and, where needed, the confirmation of qualified leadership, the result could be needless uncertainty about the regulatory environment and failure to instill confidence in our financial markets and institutions.”
Making her last scheduled appearance on Capitol Hill before stepping down as FDIC chairman July 8, Bair called on lawmakers to support agencies writing rules for financial products ranging from complex derivatives traded by the biggest banks to the fees charged to retailers when consumers use debit cards.
Bair said she hoped the FDIC board would approve final rules at its July 6 meeting requiring systemically important financial institutions to file plans for how they could be wound down in the event of collapse. That and strengthening bank capital and liquidity requirements are the agency’s highest regulatory priorities, she said.
She challenged those who have questioned the FDIC’s authority to require more disclosure from firms deemed too-big-to-fail, as part of its resolution authority under Dodd-Frank.
Benefits of Information
“I believe the skeptics underestimate the benefits of having so much more information about these institutions in advance, as well as the authority to require, if necessary, organizational changes that better align business lines and legal entities before a crisis occurs,” she said.
Federal oversight will be more effective once markets and credit-rating firms believe the government will no longer step in to rescue systemically important firms at risk of failing, Bair said.
“We really need to convince the market to understand: No more bailouts,” she said.
Bair also urged additional steps to revive the real estate market and called on regulators to maintain close scrutiny of large mortgage servicers who reached a settlement with banking agencies over mishandled home foreclosures.
“The enforcement orders do not preclude additional supervisory actions or the imposition of civil money penalties,” she said.
Bair will step down after serving as FDIC chairman for five years. Martin Gruenberg, the agency’s vice-chairman, has been nominated by President Barack Obama as Bair’s successor. He will serve as acting chairman pending Senate confirmation.