Academic

Death of a Regulator

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

The Times notes the impending passing of the thrift regulator, which became a poster boy for supine crisis regulation despite the fact that thrifts, as an industry, didn't do particularly badly during the crisis (large thrifts - Countrywide, IndyMac, and Washington Mutual - whose fees comprised a large portion of the thrift regulator's budget, were a different story, but they don't appear to have thrown off the mean).  The Dodd Frank Act will fold it in with the Treasury Department's banking regulator.

You might reasonably ask why we even had separate regulators for banks and thrifts, who did pretty similar things, and it's a good question.  The 1990s S&L crisis was a thrift crisis, after all.  The political economy story might lie in the unitary thrift charter, which was a way that a few nonbanks, like insurance companies and investment banks, got to own a single thrift.  It was their only way into banking, and they liked the thrift charter for that reason.  It meant that an industry in decline held on to its unique regulator for much longer than many people would have predicted.

Full post as published by Conglomerate on July 14, 2010 (boomark / email).