Banking
The Fed, which lends through its discount window and operates an interbank money transfer system, would have full access to bank examination data. Because regulatory policy affects monetary policy and systemic risk, it is necessary that the Fed have at least some jurisdiction. The Fed must be able to effectively deal with current policy concerns. The Banking Commission would be mainly concerned with the safety and stability of the banks. This would encourage conservative regulations, and could inhibit economic growth. The Fed clearly has a hands on knowledge of the banking system. "The common indicators of monetary policy - the monetary aggregates, the federal funds rate, and the growth of loans - are all influenced by bank behavior and bank regulation. Understanding changes and taking action in a timely fashion can be achieved only by maintaining contact with examiners who are directly monitoring banks" (Syron 7). The banking system is what ultimately determines monetary policy. It is only common sense to have personnel in the Fed that have a better understanding of the system other than just through financial statements and examination reports. The Fed also needs the authority to change bank behavior that is inconsistent with its established monetary policy and with financial stability. This requires both the responsibility for writing the regulations and the responsibility for enforcing those regulations through bank supervision. State banking charters have already started to be affected. Under the proposed plan, state chartered banks would be subject to two regulators. While the federal bank would have only one. Thus, making the state bank charter less attractive. However, an increasing number of banks are opting for state supervision. It turns out that many banks are afraid of losing existing freedoms, or of failing to gain new ones, if supervision is centralized. "State regulators have given their banks more freedom than federal ones: 17 now permit banks to sell insurance (and five to underwrite it, 23 allow them to operate discount stockbrokers and a handful even let them run estate agencies" (Anonymous 91). The FDIC has two main criticisms of the Treasury's plan. First, FDIC Chairman Tigert believes "that it is very important that there be checks and balances in the system going forward" (Cocheo 43). Second, Tigert believes that, since the FDIC is the one who writes the checks for bank failures, the FDIC should be allowed to keep its independence. It is necessary to maintain the checks and balances of different agencies. This separation is necessary because of the differences in examinations of the different regulatory agencies with respect to the same institutions. It is important "that the independent [deposit] insurer have access to information that's available not only through reporting requirements, but also through on-site examinations" (Cocheo 43). Tigert explains that the FDIC must keep backup examination authority. As well as maintain the ability to conduct on-site examinations of all institutions it insures, not just the state-chartered nonmember banks it supervises directly. "She agrees with those who say there is no need for duplicative [next page]