Board members of the Federal Deposit Insurance Corporation (FDIC) are aptly demonstrating Einstein’s maxim that “bureaucracy is the death of all sound work”. In this case, the board is considering an expansion of the FDIC’s regulatory reach that would impose more costs on asset managers and the millions of Americans who invest in the index funds that they manage yet provide no discernible benefit to the broader public.
If implemented, FDIC staff would be empowered to regularly examine large asset managers who own, through their various managed funds, a 10% or larger stake in FDIC-regulated banks. Ostensibly, the purpose of this regulatory overreach is to ensure that these asset managers are not improperly influencing the operations of banks that the FDIC regulates. Such efforts are neither needed nor beneficial.
The Federal Reserve already regulates bank holding companies, and their oversight responsibilities include issues that may arise due to ownership structure. As recently as 2020, the Federal Reserve clarified when asset managers, through the funds they manage for clients, “has the ability to exercise a controlling influence” over a banking organization. Consequently, the FDIC’s proposal is duplicative and unnecessary.
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.
The FDIC’s Ill-Advised Regulatory Grab
Wayne Winegarden
Board members of the Federal Deposit Insurance Corporation (FDIC) are aptly demonstrating Einstein’s maxim that “bureaucracy is the death of all sound work”. In this case, the board is considering an expansion of the FDIC’s regulatory reach that would impose more costs on asset managers and the millions of Americans who invest in the index funds that they manage yet provide no discernible benefit to the broader public.
If implemented, FDIC staff would be empowered to regularly examine large asset managers who own, through their various managed funds, a 10% or larger stake in FDIC-regulated banks. Ostensibly, the purpose of this regulatory overreach is to ensure that these asset managers are not improperly influencing the operations of banks that the FDIC regulates. Such efforts are neither needed nor beneficial.
The Federal Reserve already regulates bank holding companies, and their oversight responsibilities include issues that may arise due to ownership structure. As recently as 2020, the Federal Reserve clarified when asset managers, through the funds they manage for clients, “has the ability to exercise a controlling influence” over a banking organization. Consequently, the FDIC’s proposal is duplicative and unnecessary.
Click to read the full article in Forbes.
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.