Today's Article
The American Spark
offers to its readers a
federal report which
clearly 'explains which
agencies are
responsible for which
institutions, activities,
and markets.'
offers to its readers a
federal report which
clearly 'explains which
agencies are
responsible for which
institutions, activities,
and markets.'
The American Spark
 |
 |
 |
 |
 |
Just Who Is Watching U.S. Bankers And Securities Traders?
By Cliff Montgomery - Feb. 8th, 2015
Ever wonder who is supposed to be watching over U.S. bankers and securities traders? A recent, easy-to-
understand report from the Congressional Research Service (CRS) “provides an overview of the regulatory
policies of the agencies that oversee banking and securities markets and explains which agencies are
responsible for which institutions, activities, and markets.”
The fiercely important matters of banking, securities trading and federal regulation can be quite difficult to
grasp; so this CRS study is a great help to those of us who are not experts in these fields.
A part of the Library of Congress, the CRS analyzes a large number of national policy issues and creates
easy-to-understand, non-partisan reports for U.S. senators and House members.
Yet for some reason, Congress refuses to make these essential policy studies directly available for public
perusal on the Internet.
But The American Spark has obtained a copy of this CRS report from the Federation of American Scientists
- a non-profit organization which serves as a government watchdog and public policy advocate.
Below, the Spark offers its readers the full CRS report summary:
“Financial regulatory policies are of interest to Congress because firms, consumers, and governments fund
many of their activities through banks and securities markets. Furthermore, financial instability can damage
the broader economy. Financial regulation is intended to protect borrowers and investors that participate in
financial markets and mitigate financial instability.
“This report provides an overview of the regulatory policies of the agencies that oversee banking and
securities markets and explains which agencies are responsible for which institutions, activities, and markets.
“Some agencies regulate particular types of institutions for risky behavior or conflicts of interest, some
agencies promulgate rules for certain financial transactions no matter what kind of institution engages in
them, and other agencies enforce existing rules for some institutions, but not for others. These regulatory
activities are not necessarily mutually exclusive.
Banking
“U.S. banking regulation traditionally focuses on prudence. Banks’ business decisions are regulated for safety
and soundness and adequate capital.
“In addition, banks are given access to a lender of last resort, and some bank creditors are provided
guarantees (deposit insurance).
“Regulating the risks that banks take is believed to help smooth the credit cycle. The credit cycle refers to
periodic booms and busts in lending.
“Prudential safety and soundness regulation and capital requirements date back to the 1860s when bank
credit formed the money supply. The Federal Reserve (Fed) as lender of last resort was created following the
Panic of 1907. Deposit insurance was established in the 1930s to reduce the incentive of depositors to
withdraw funds from banks during a financial panic.
Securities, Derivatives, and Similar Contract Markets
“Federal securities regulation has traditionally focused on disclosure and mitigating conflicts of interest, fraud,
and attempted market manipulation, rather than on prudence. Securities regulation is typically designed to
ensure that market participants have access to enough information to make informed decisions, rather than to
limit the riskiness of the business models of publicly traded firms.
“Firms that sell securities to the public must register with the Securities and Exchange Commission (SEC).
SEC registration in no way implies that an investment is safe, only that material risks have been disclosed.
The SEC also registers several classes of securities market participants and firms. It has enforcement powers
for certain types of industry misstatements or omissions and for certain types of conflicts of interest.
“Derivatives trading is supervised by the Commodity Futures Trading Commission (CFTC), which oversees
trading on the futures exchanges, which have self-regulatory responsibilities as well.
“The Wall Street Reform and Consumer Protection Act (Dodd-Frank Act, P.L. 111-203) required more
disclosures in the over-the-counter (off-exchange) derivatives market than prior to the financial crisis and has
granted the CFTC and SEC authority over large derivatives traders.
Government Sponsored Enterprises
“The Federal Housing Finance Agency (FHFA) oversees a group of government-sponsored enterprises
(GSEs). Two of the GSEs, Fannie Mae and Freddie Mac, securitize residential mortgages, and they were
placed in conservatorship following mortgage losses in 2008.
“In the conservatorship, the Treasury provides financial support to the GSEs and FHFA and Treasury have
managerial control over the enterprises.
“FHFA also regulates the Federal Home Loan Bank (FHLB) system, a GSE composed of regional banks to
bankers owned by the 8,000 financial institutions that they serve.
Changes Following the 2008 Financial Crisis
“The Dodd-Frank Act [DFA] created the interagency Financial Stability Oversight Council (FSOC) and
authorized a permanent staff to monitor systemic risk; [...it also] consolidated bank regulation from five
agencies to four.
“The DFA granted the Federal Reserve oversight authority and the Federal Deposit Insurance Corporation
(FDIC) resolution authority over the largest financial firms. The Dodd-Frank Act consolidated consumer
protection rule-making, which had been dispersed among several federal agencies, in the new Consumer
Financial Protection Bureau.
Special Topics
“The appendices in this report include additional information on topics, such as the regulatory structure prior
to the Dodd-Frank Act (DFA), organizational differences among financial firms, and the rating system that
regulators use to evaluate the health of banks. A list of common acronyms and a glossary of common
financial terms are also included as appendices.”
Like what you're reading so far? Then why not order a full year (52 issues) of The American Spark
e-newsletter for only $15? A major article covering a story not being told in the Corporate Press will be
delivered to your email every Monday morning for a full year, for less than 30 cents an issue. Order Now!
By Cliff Montgomery - Feb. 8th, 2015
Ever wonder who is supposed to be watching over U.S. bankers and securities traders? A recent, easy-to-
understand report from the Congressional Research Service (CRS) “provides an overview of the regulatory
policies of the agencies that oversee banking and securities markets and explains which agencies are
responsible for which institutions, activities, and markets.”
The fiercely important matters of banking, securities trading and federal regulation can be quite difficult to
grasp; so this CRS study is a great help to those of us who are not experts in these fields.
A part of the Library of Congress, the CRS analyzes a large number of national policy issues and creates
easy-to-understand, non-partisan reports for U.S. senators and House members.
Yet for some reason, Congress refuses to make these essential policy studies directly available for public
perusal on the Internet.
But The American Spark has obtained a copy of this CRS report from the Federation of American Scientists
- a non-profit organization which serves as a government watchdog and public policy advocate.
Below, the Spark offers its readers the full CRS report summary:
“Financial regulatory policies are of interest to Congress because firms, consumers, and governments fund
many of their activities through banks and securities markets. Furthermore, financial instability can damage
the broader economy. Financial regulation is intended to protect borrowers and investors that participate in
financial markets and mitigate financial instability.
“This report provides an overview of the regulatory policies of the agencies that oversee banking and
securities markets and explains which agencies are responsible for which institutions, activities, and markets.
“Some agencies regulate particular types of institutions for risky behavior or conflicts of interest, some
agencies promulgate rules for certain financial transactions no matter what kind of institution engages in
them, and other agencies enforce existing rules for some institutions, but not for others. These regulatory
activities are not necessarily mutually exclusive.
Banking
“U.S. banking regulation traditionally focuses on prudence. Banks’ business decisions are regulated for safety
and soundness and adequate capital.
“In addition, banks are given access to a lender of last resort, and some bank creditors are provided
guarantees (deposit insurance).
“Regulating the risks that banks take is believed to help smooth the credit cycle. The credit cycle refers to
periodic booms and busts in lending.
“Prudential safety and soundness regulation and capital requirements date back to the 1860s when bank
credit formed the money supply. The Federal Reserve (Fed) as lender of last resort was created following the
Panic of 1907. Deposit insurance was established in the 1930s to reduce the incentive of depositors to
withdraw funds from banks during a financial panic.
Securities, Derivatives, and Similar Contract Markets
“Federal securities regulation has traditionally focused on disclosure and mitigating conflicts of interest, fraud,
and attempted market manipulation, rather than on prudence. Securities regulation is typically designed to
ensure that market participants have access to enough information to make informed decisions, rather than to
limit the riskiness of the business models of publicly traded firms.
“Firms that sell securities to the public must register with the Securities and Exchange Commission (SEC).
SEC registration in no way implies that an investment is safe, only that material risks have been disclosed.
The SEC also registers several classes of securities market participants and firms. It has enforcement powers
for certain types of industry misstatements or omissions and for certain types of conflicts of interest.
“Derivatives trading is supervised by the Commodity Futures Trading Commission (CFTC), which oversees
trading on the futures exchanges, which have self-regulatory responsibilities as well.
“The Wall Street Reform and Consumer Protection Act (Dodd-Frank Act, P.L. 111-203) required more
disclosures in the over-the-counter (off-exchange) derivatives market than prior to the financial crisis and has
granted the CFTC and SEC authority over large derivatives traders.
Government Sponsored Enterprises
“The Federal Housing Finance Agency (FHFA) oversees a group of government-sponsored enterprises
(GSEs). Two of the GSEs, Fannie Mae and Freddie Mac, securitize residential mortgages, and they were
placed in conservatorship following mortgage losses in 2008.
“In the conservatorship, the Treasury provides financial support to the GSEs and FHFA and Treasury have
managerial control over the enterprises.
“FHFA also regulates the Federal Home Loan Bank (FHLB) system, a GSE composed of regional banks to
bankers owned by the 8,000 financial institutions that they serve.
Changes Following the 2008 Financial Crisis
“The Dodd-Frank Act [DFA] created the interagency Financial Stability Oversight Council (FSOC) and
authorized a permanent staff to monitor systemic risk; [...it also] consolidated bank regulation from five
agencies to four.
“The DFA granted the Federal Reserve oversight authority and the Federal Deposit Insurance Corporation
(FDIC) resolution authority over the largest financial firms. The Dodd-Frank Act consolidated consumer
protection rule-making, which had been dispersed among several federal agencies, in the new Consumer
Financial Protection Bureau.
Special Topics
“The appendices in this report include additional information on topics, such as the regulatory structure prior
to the Dodd-Frank Act (DFA), organizational differences among financial firms, and the rating system that
regulators use to evaluate the health of banks. A list of common acronyms and a glossary of common
financial terms are also included as appendices.”
Like what you're reading so far? Then why not order a full year (52 issues) of The American Spark
e-newsletter for only $15? A major article covering a story not being told in the Corporate Press will be
delivered to your email every Monday morning for a full year, for less than 30 cents an issue. Order Now!
Wait, why does an
independent news source
run advertisements? The
Spark answers in its
advertising policy.
independent news source
run advertisements? The
Spark answers in its
advertising policy.