| WASHINGTON, April 17
WASHINGTON, April 17 A top U.S. bank regulator
said on Wednesday the country must do more to protect taxpayers
from having to spend billions on bank bailouts, one of a growing
chorus of critics of the current rules.
Tom Hoenig, vice chairman of the Federal Deposit Insurance
Corp (FDIC), said in New York that the Volcker rule - which
would bar banks from betting their own money on financial
markets but has not yet been finalized by regulators - would not
go far enough.
Instead, Hoenig wants to force banks to hive off risky
activities such as trading and creating derivatives and to
eliminate any taxpayer subsidy for these businesses.
"A safety net only for commercial banking activities
provides stability to critical financial infrastructure," Hoenig
said in prepared comments.
Hoenig has repeatedly laid out this view of how to
restructure the banking sector in recent years. The debate over
whether U.S. officials have done enough to prevent a repeat of
the 2007-2009 financial crisis has been heating up again in
Politicians clamped down on the banking sector after the
credit meltdown, forcing them to raise far more shareholder
capital to fund their business and making risky trading
activities prohibitively expensive.
But many question whether the 2010 Dodd-Frank law and other
measures have done enough to crack down on the country's largest
banks such as JP Morgan Chase & Co, Citigroup and
Bank of America Corp.
Hoenig's comments follow a move by two senators to draft a
bill that would force banks to hold far more capital and throw
out international bank capital rules. There is little chance,
however, that such proposals would make it through a divided
Commercial banks could continue to engage in wealth
management and the underwriting of new issues of stocks and
bonds under Hoenig's proposal.
Money market funds and the repo market - parts of the
so-called shadow banking system through which banks fund large
parts of their daily cash needs - should be taken out from
beneath taxpayer safety nets such as deposit insurance or the
Fed's discount window, Hoenig said.
He also pushed back against claims by some groups that small
banks would experience tougher competition if the big banks were
broken up and had to start focusing on local markets instead of
on global capital market activities.
"It would seem that only if they were forced to do so, would
they compete with the smaller banks. This is untrue," Hoenig