Below you can see wording from Dr. Douglas Agbetsiafa’s
2009 article in Dialogue/SWIFT and contrast that wording with the works
of other, earlier, authors. Much of Dr.
Agbetsiafa’s wording is the same (or substantially similar to) the wording used
by others.
The Dialogue/Swift article is:
Agbetsiafa, Douglas (2009) Analysis – A New Financial
Foundation: Rebuilding Financial Supervision and Regulation, Dialogue/SWIFT, Q4: 54-58,
Douglas Agbetsiafa is Professor of Economics and Chair of the Economics Area at Indiana University South Bend (IUSB). He holds a PhD in Economics from the University of Notre Dame. That PhD also contains similar wording to the works of earlier published authors.
From Agbetsiafa article, page 55:
One
example of an apparent inefficiency lies in the difficulty of maintaining
strong communication links among the different supervisors responsible for the
various entities.
Compare this to:
One
example of an apparent inefficiency lies in the difficulty of maintaining
strong communication links among the different supervisors responsible for the
various entities in one holding company
From Agbetsiafa article, page 55:
One
prominent feature of financial services regulation in the United States is the
large number of agencies involved. Regulatory oversight in the United States is
complex, especially compared to that of other countries. Depending on charter
type, four federal agencies, as well as state agencies, oversee banking and
thrift institutions. States typically maintain depository and insurance
commissions that examine depositories, along with federal agencies, and
supervise and regulate insurance companies. This sharing of supervisory responsibility
for depositories varies by institution.
Compare this to:
One
prominent feature of financial services regulation in the United States is the
large number of agencies involved.
Regulatory
oversight in the United States is complex, especially compared to that of other
countries (as explored in Section 6). In the United States, depending on
charter type, four federal agencies, as well as state agencies, oversee banking
and thrift institutions (Table 1 lists regulators and their functions). Credit
unions are regulated by one federal agency, the Office of Thrift Supervision
(OTS), and state agencies. Securities firms are also regulated at the federal
and state level in addition to oversight by self- regulatory organizations
(SROs). The Commodity Futures Trading Commission (CFTC) regulates futures and
options activities. Meanwhile, the insurance industry is regulated mainly at
the state level.
States
typically maintain depository and insurance commissions that examine
depositories, along with federal agencies, and supervise and regulate insurance
companies. This sharing of supervisory responsibility for depositories varies
by institution type, …
From Agbetsiafa article, page 55:
One
example of an apparent inefficiency
lies in the difficulty of maintaining
strong communication links among the different supervisors responsible for the
various entities. Communication is especially vital for information exchange
among supervisors when dealing with a troubled financial firm.
Compare this to:
One
example of an apparent inefficiency lies in the difficulty of maintaining strong
communication links among the different supervisors responsible for the various
entities in one holding company. (Communication is important because, as
discussed earlier, losses in one subsidiary can endanger others.)
From Agbetsiafa article, page 55:
Starting
in the 1980s, the financial services industry began moving
toward an
unprecedented integration. Specifically, banking firms began to include
securities in subsidiaries following a 1987 order by the Board of Governors of
the Federal Reserve System allowing bank holding companies to offer limited
securities services.
Compare this to:
Starting
in the 1980s, the financial services industry began moving toward an
integration that had not been present before. Specifically, banking firms began
to include securities subsidiaries following a 1987 order by the Board of
Governors of the Federal Reserve System allowing bank holding companies to
offer securities services to a limited extent (Walter 1996, p. 25-28).
From Agbetsiafa article, page 55:
The
Gramm-Leach- Bliley Act of 1999 (GLBA) authorised combinations of securities
and banking firms within one holding company, thus removing the limitations set
on such combinations by the 1987 rule. The Act also allowed the affiliation of
insurance firms and banks.
Compare this to:
The
Gramm-Leach-Bliley Act (GLBA) of 1999 authorized combinations of securities and
banking firms within one holding company, thus removing the limitation set on
such combinations by the 1987 Board of Governors rule. The Act also allowed the
affiliation of insurance firms and banks.
From Agbetsiafa article,
page 55:
The GLBA
designated the Federal Reserve as the umbrella supervisor
of those banking
companies that exercised the expanded powers.
The
Federal Reserve has the responsibility for monitoring the soundness of the
holding company and for ensuring that non-bank losses are not shifted to bank
affiliates. Under the GLBA rules, the Federal Reserve does not typically
supervise the non-bank affiliates.
Compare this to:
The
Gramm-Leach-Bliley Act (GLBA) of 1999 authorized combinations of securities and
banking firms within one holding company, thus removing the limitation set on
such combinations by the 1987 Board of Governors rule. The Act also allowed the
affiliation of insurance firms and banks. The GLBA designated the Federal
Reserve the umbrella supervisor of those banking companies that exercise
expanded powers. Umbrella oversight means responsibility for monitoring the
soundness of the holding company and for ensuring that nonbank losses are not
shifted to bank affiliates
From Agbetsiafa article,
page 55:
The
mortgage-related financial
turmoil that began in the fall of 2007 itself
produced some movement, if
only temporary, toward regulatory consolidation.
Specifically, during 2008, a group of security dealers came under Federal
Reserve supervisory scrutiny for the first time in recent history.
Compare this to:
Beyond
the evolution toward consolidation, driven by the 1987 Board of Governors
ruling and the GLBA, events related to the mortgage market-related financial
turmoil that began in 2007 produced additional movement, if perhaps temporary,
toward regulatory consolidation. Specifically, during 2008 a group of
securities dealers came under Federal Reserve supervisory scrutiny for the
first time in recent history.
From Agbetsiafa article,
page 55:
Over the
last 35 years, several proposals had been presented to consolidate the US
financial regulatory system. In most cases, the objectives are to increase
efficiency and reduce duplication in the nation’s financial regulatory system,
lowering the cost and burden of regulation. To date,
the proposals have not led
to the enactment of legislation. In March 2008, the Treasury Department offered
a consolidation proposal that builds
on the work of the earlier efforts.1
Compare this to:
Over the
last 35 years, several proposals have been advanced to consolidate the U.S.
financial regulatory system. In most cases the proposals’ objectives are to
increase efficiency and reduce duplication in the nation’s financial regulatory
system, lowering the cost and burden of regulation. To date, the proposals have
not led to the enactment of legislation. In March 2008, the Treasury Department
offered a consolidation proposal which builds on the work of the earlier
proposals.
From Agbetsiafa article, page 56:
The plan
would create a new Financial Services Oversight Council of financial regulators
to identify emerging systemic risks and improve intra-agency cooperation;
stronger capital and other prudential standards for all financial firms, and
even higher standards for large, interconnected firms; and a process to safely
unwind these firms during periods of financial crises.
Compare this to:
A new
Financial Services Oversight Council of financial regulators to identify
emerging systemic risks and improve interagency cooperation.
New
authority for the Federal Reserve to supervise all firms that could pose a
threat to financial stability, even those that do not own banks.
Stronger
capital and other prudential standards for all financial firms, and even higher
standards for large, interconnected firms.
From Agbetsiafa article,
page 56:
The plan
also proposes a new National Bank Supervisor for all federally chartered banks
and eliminates the federal thrift charter and other loopholes that allowed
depositories to avoid bank holding company regulation by the Fed as well as
requiring registration with the SEC of advisers of hedge funds and other pools
of private capital.
Compare this to:
A new
National Bank Supervisor to supervise all federally chartered
banks.
Elimination of the federal thrift charter and other loopholes that
allowed some depository institutions to avoid bank holding company regulation
by the Federal Reserve.
From Agbetsiafa article,
page 56:
The plan
proposes enhanced regulation of securitisation markets, including: new
requirements for transparency, stronger regulation of credit rating agencies; a
requirement that issuers and originators retain financial interest in
securitised loans; comprehensive regulation of all over- the-counter
derivatives; and expanded powers for the Federal Reserve to oversee payment,
clearing and settlement systems.
Compare this to:
•
Enhanced
regulation of securitization markets, including new requirements for market
transparency, stronger regulation of credit rating agencies, and a requirement
that issuers and originators retain a financial interest in securitized loans.
•
Comprehensive
regulation of all over-the-counter derivatives.
•
New
authority for the Federal Reserve to oversee payment, clearing, and
settlement
systems.
From Agbetsiafa article,
page 56:
The plan
envisages the creation of
a new Consumer Financial Protection Agency to protect
consumers across the financial sector from unfair, deceptive, and abusive
practices; stronger regulations
to improve transparency, fairness, and
appropriateness of consumer and investor products and services; and a level
playing field and higher standards for providers of consumer financial products
and services, whether or not they are part of a bank.
Compare this to:
A new
Consumer Financial Protection Agency to protect consumers across the financial
sector from unfair, deceptive, and abusive practices.
Stronger regulations to
improve the transparency, fairness, and appropriateness of consumer and
investor products and services.
A level
playing field and higher standards for providers of consumer financial products
and services, whether or not they are part of a bank.
From Agbetsiafa article,
page 57:
The plan
proposes international reforms to support our efforts at home, including
strengthening the capital framework, improving oversight of global financial
markets, coordinating supervision of internationally active firms and enhancing
crisis management tools.
Compare this to:
International
reforms to support our efforts at home, including strengthening the capital
framework; improving oversight of global financial markets; coordinating
supervision of internationally active firms; and enhancing crisis management
tools.
From Agbetsiafa article,
page 58:
In order
to manage systemic risks and to prevent future AIG-like debacles, the Federal
Reserve will have expanded authority over financial activities of firms,
regardless of the firm’s core business. In addition, there will be more
collaboration
Compare this to:
To manage systemic risks and to prevent future AIG-like
debacles, the Federal Reserve and the FDIC will be given expanded authority
over financial activities of firms, regardless of the firms' core business. And
there'll be more collaboration between the Securities and Exchange Commission
(SEC) and the Commodity Futures Trading Commission, though those agencies won't
merge anytime soon.
From Agbetsiafa article,
page 58:
Credit
rating agencies will be required to be much more open about their
decision-making processes, though their business models would not drastically
change. They would continue to derive their revenues from the firms whose debt
they are rating. And on executive compensation, there would not be outright
caps, but the SEC will require companies to report more clearly details of pay
and bonuses.
In addition, there will be scrutiny of directors’ compensation.
Compare this to:
Credit rating agencies will be required to be much more open
about their decision making processes. But their business models won't
drastically change. They'll still be getting their revenues from the firms
whose debt they are rating. And on executive compensation, there won't be
outright caps, but companies will be required to more clearly report to the SEC
the details of pay and bonuses at financial companies. Plus, there'll be closer
scrutiny of directors' compensation.
From Agbetsiafa article,
page 58:
All
financial firms will be required to keep higher capital and liquidity
standards. Firms that offer securitised assets will have
to hold a bigger
percentage on their books so they have skin in the game. And insurance
companies will be offered federal charters, despite longstanding resistance
from the states.
Compare this to:
All financial players will be required to have higher capital
and liquidity standards. Firms that offer securitized assets will have to hold
a bigger percentage on their books so they have skin in the game. And insurance
companies will be offered federal charters, despite longstanding resistance
from the states.
From Agbetsiafa article,
page 58:
Together,
these changes will bring greater market stability, but at a steep price.
Lending will be costlier with some high-risk borrowers shut out, even after a
recovery begins. There will be added operating costs for financial firms to
meet new paperwork requirements; taxpayers will have to foot the bill to pay
more regulators to track more financial activities.
Compare this to:
Together, the changes will bring more market stability but at a
steep price: Lending will be costlier with some high risk borrowers cut out,
even after recovery begins. And there'll be added operating costs for financial
firms to meet new paperwork requirements. Plus, taxpayers will have to foot the
bill for paying more regulators to track more financial activities. Robert
Litan, a senior fellow at the Brookings Institution think tank and vice
president for research and policy at the Kauffman Foundation in Kansas City,
Mo., says, "New regulation will make credit more expensive. But leverage
was part of the problem."
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