Three women walk into a large carpeted office with their sweaters, coffee and reading glasses. Each woman is carrying under her arm a copy of The Book: The Dodd-Frank Wall Street Reform and Consumer Protection Act.
They spread themselves out at the table, offer me coffee, laugh generously at my bad jokes. It feels like we're all sitting down for the weekly Bank Regulators' Book Club. The members of the club — Roberta McInerney, Kymberly Copa and Ruth Amberg — are senior regulators at the FDIC, and their job is to make The Book come to life.
The Book — the big finance-overhaul bill Congress passed last year — calls for lots of changes in the financial system. But it only provides a general outline. All the key details have to be hammered out by people like Roberta, Kimberly and Ruth.
The FDIC is responsible for writing 44 new banking rules. As Roberta shows me her multi-colored tabs referring to key sections, Kymberly Copa nods and holds up an incredibly tattered copy of The Book.
"My book is very worn," she says. "It basically falls open where you need it to."
There are gatherings like this being held at bank regulatory agencies across Washington, D.C.
The Book says banks need to become safer by holding more capital. How much more? That's up the regulators. The Book says derivatives should be regulated. Which derivatives? And regulated how, exactly?
The FDIC is supposed to figure out how to make it so banks aren't too big to fail. Congress wants the FDIC to be able to take over and run enormous troubled banks, as they do with smaller banks.
This gives rise to today's book club conversation: If the FDIC does have to do this, where will the money come from to wind down one of these giants?
Roberta flips to section 206 for discussion, and says:
The FDIC, after 30 days, we can borrow an amount that's equal to 90% of the fair value of the total consolidated assets of each company that are available for repayment.
She stops here for emphasis, with raised eyebrows to indicate, well, obviously here is where the interesting part is:
...this is maybe boring for people, but as a lawyer, well what does the term fair value mean? The term fair value is not defined.
Discussion ensues. Does fair value mean market value? What was the intended meaning of the word "appropriate" in the next section? It's around this point that the Book Club starts to feel more like a Talmud study session.
Details, yes. But you could argue that this is the part of the bank reform process that really matters. At least that's what the bank lobbyists seem to think.
"Those folks, instead of focusing on Congress, because the bill has passed are now focusing on regulators," says another regulator — Commissioner Bart Chilton of the Commodities Futures and Exchange Commission.
"We are having meetings like crazy," Chilton says. "Folks are in talking with us about what they want. We are far outnumbered."
The women at the FDIC say they try their best to steer clear of undue influence as they write their 44 rules. They say they try to stick to The Book.