Financial Reforms, Obama style.

This is the fourteenth in a series of articles on the financial reforms sought to be initiated by the Obama Administration in U.S.A.

Elimination of the Thrift Charter:  The Thrift Charter came into existence in the wake of the Great Depression, as a specialized class of depository institutions focussed on residential mortgage lending.  

The Obama Administration proposed closure of these thrift charters, in due course, as their importance to the financial system had come down over the years, on the one hand, and they have been badly affected on account of the housing mortgage crisis, on the other.   However, the Administration proposed to retain the applicable interstate branching rules and apply them to the State and National Banks.

National and State Banks:  Though the National and the State Banks are seen as being subject to regulation that has improved over time, still certain areas needed a closer look to improve supervision and regulation.   One of the major concerns of the Administration now is to eliminate the scope for arbitrage oportunities arising from the remaining multiple bank charters and supervisors.

Further, the differences in applicable policies and regulations to national and state member banks, and state non-member banks would be reduced.   And last but not the least, the practice of switching charters and supervisors by the troubled Banks would be restricted.

Interstate Branching:  Presently, Banks do not have the facility of interstate Branching without having to go through a cumbersome process including acquisition of an existing Bank.   Though some states do permit interstate Branching, Banks are unable to operate freely across interstate borders on account of the restrictions of other states.

In order to promote competition among Banks, to promote a wider choice to the consumer, and to provide services in under-served areas, and to improve the resilience of the Banks to economic adversities, Banks would be  allowed to freely open Branches across states.

                                                                                             To be concluded.