Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

You've Got To Get In Their Face


Economics of Contempt offers some unsolicited advice for bank regulators:

"As the Dodd-Frank rule-making process begins in earnest, I’d like to offer some unsolicited advice to regulators, and specifically the Fed.

I spent many years at a large dealer, so I have some thoughts on how an effective supervisory regime for large dealer banks needs to be structured.

Put simply: You need to get in the banks’ face. I’m deadly serious about this. First, significantly expand the dedicated supervisory teams for the dealer banks that qualify as Tier 1 FHCs. It’s not enough to have a 5-10 person supervisory team for dealer banks like JPMorgan , BofA-Merrill Lynch , Morgan Stanley , etc.

The capital markets side of each of these banks has tens of thousands of employees, and hundreds of people in senior risk-taking positions. The supervisory team for each Tier 1 FHC needs to have at least 50 people. Again, I am deadly serious."

This is probably a good piece of advice. The problem, however, is how the government could hire that many competent supervisors. We're not sure that there are enough people willing to do bank supervision to fill these teams.

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