Schumer Has Praise for Paulson's Regulatory Restructuring Plan
In what seems like a bizarre twist, a prominent Democrat has come out in favor of the Bush administrationâs plan to restructure the regulatory authority of the Federal Reserve.
Sen. Chuck Schumer (D-N.Y.) told CNBCâs Erin Burnett on the March 31 âStreet Signsâ that he likes Treasury Secretary Henry Paulsonâs plan. Paulson unveiled his plan earlier that day in a press conference.
âI think it is a very good foundation,â Schumer said. âFirst, to regulate mortgage brokers makes eminent sense. Some of us have been calling for that for eight months. Mortgage bankers are regulated. They canât sell a mortgage someone canât afford. Mortgage brokers, who developed only in the last few years, are âthe wild westâ in this whole thing and they need to be regulated.â
Schumer represents New York, home of many of the financial institutions that will be affected by this change in federal regulatory structure. Schumer is also a member of the U.S. Senateâs Banking, Housing and Urban Affairs Committee. Schumer favored Paulsonâs idea of consolidation.
â[P]aulsonâs beginning is very, very good,â Schumer said. âItâs a foundation. To consolidate regulators makes eminent sense. When you have so many regulators, sometimes they tell businesses to do different things. Many times things fall between the cracks.â
âI think Secretary Paulson â I want to give him a pat on the back for starting this discussion and starting this process,â Schumer said. âItâs not a moment too soon.â
Schumer disagreed, however, on the number of regulators. Paulson favored three regulators â the Federal Reserve to regulate market stability, the new âPrudential Financial Regulatorâ to oversee banks and insurance and the âBusiness Conduct Regulator,â which would assume the roles of the Commodity Futures Trading Commission (CTFC) and the Securities and Exchange Commission (SEC).
âWell, no â I think one regulator is the way to go,â Schumer said. âTo have different ones â you often have things fall between the cracks. And there can be a very strong pro-consumer division in the regulatory body.â
Schumer said one regulator would be more efficient and would have more accountability.
âWhen you have one regulator, you know the buck stops in a certain place,â Schumer said. âWhen you have three, someone may say, âLet the other guy do it,â or the opposite. They may fight for turf. One regulator works.â
Another Democrat, Rep. Barney Frank (Mass.), chairman of the House Financial Services Committee, criticized Paulsonâs plan, saying it âgoes too far in diminishing the role of the states.â However, Schumer praised it in that regard.
âWhen you have 50 states, each firing different regulatory modes at nationwide companies âŠ theyâre caught,â Schumer said. âThey donât know what to do. One regulator says do one thing. One regulator says do the other. This is a national, even an international financial market and to have 50 different states each saying their own thing â thatâs an idea from the 19th century, not the 21st century.â