Sept. 29, 2017
Trump’s Regulators Chart Dangerous Path for Banking Industry, Shouldn’t Let AIG Escape Oversight
Statements of Public Citizen Experts
Note: Acting Comptroller of the Currency Keith Noreika said Thursday that he may consider granting special purpose bank charters for financial technology services to become nonfinancial commercial firms. Separately, the Financial Stability Oversight Council, composed of all the federal bank regulators, is reportedly considering removing insurance giant AIG from special oversight by removing its designation as a “systemically important financial institution.”
“Letting the likes of Google and Walmart become banks would shatter the vital, centuries-old separation of banking and commerce in the United States. Lenders should share the same goals as the borrower, namely the success of the borrower. When a lender also can compete with the borrower’s business, that inverts the lender’s incentive, because it could take over and run that business. Community banking has served the country well, where bankers know their customers because they live with them. Financial technology doesn’t represent a special way for customers to deal with bankers any more than the telephone has.
“Letting AIG escape oversight as a systemically important financial institution insults Americans who financed what was the biggest bailout of the 2008 Wall Street crash. Worse, taxpayers were forced to pay bonuses to the very traders who created the toxic credit default swaps behind the firm’s failure. Oversight has led AIG to reduce its size, but it still controls nearly $500 billion in assets and operates in more than 80 countries. Closer scrutiny not only reassures Americans, but it also should comfort shareholders that AIG isn’t engaged in high-risk activities inappropriate for any insurance firm.
“Trump’s Wall Street regulators are charting a dangerous path that will leave working Americans more vulnerable to abuse and even calamity.”
– Bartlett Naylor, financial policy advocate, Public Citizen’s Congress Watch division
“If regulators grant AIG’s request to escape special oversight and the stock rises 10 percent, Carl Icahn’s wealth would jump $200 million. Even if it rises just a percent, he’d gain $20 million. Congress should investigate Icahn’s role, if any, in influencing a decision about AIG. The financial titan has surely demonstrated his willingness to capitalize on his relationship with President Trump to seek regulatory favor.”
– Robert Weissman, president, Public Citizen