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The Bank Regulators' Book Club

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The Bank Regulators' Book Club

Planet Money

The Bank Regulators' Book Club

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Now, let's talk about the evolution of banking rules. Last summer, Congress passed a bill to reform Wall Street but did not spell out the specific regulations. Now, some people are writing the new rules of banking and Chana Joffe-Walt of our Planet Money team introduces us to some of them.

CHANA JOFFE-WALT: Three women walk into a large carpeted office with their sweaters, coffee, reading glasses, each carrying "The Book" under an arm - "The Dodd-Frank Wall Street Reform and Consumer Protection Act." They spread themselves out at a table, offer me coffee, laugh generously at my bad jokes. It feels a little bit like we're all sitting down for the weekly Bank Regulator Book Club.

(Soundbite of laughter)

Unidentified Woman: That's why I laughed.

JOFFE-WALT: OK. So, if you just tell me your names and titles.

Ms. ROBERTA MCINERNEY (Deputy General Counsel, FDIC): Roberta McInerney, Deputy General Counsel, FDIC.

Ms. KYMBERLY COPA (Senior Counsel, FDIC): Kymberly Copa, Senior Counsel, FDIC.

Ms. RUTH AMBERG (Senior Counsel, FDIC): Ruth Amberg, Senior Counsel, FDIC.

JOFFE-WALT: Ladies and gentlemen, meet your banking regulators - three women tasked with taking The Book in front of them, bank reform legislation and making it come to life.

Ms. MCINERNEY: Yes. And we have tabs with the main provisions that we need to refer to really quickly.

JOFFE-WALT: The FDIC is responsible for writing 44 new banking rules, inspired by this book. As Roberta shows me her multi-colored tabs referring to key sections, Kymberly Copa nods and holds up her incredibly tattered book.

Ms. COPA: My book is very worn. It basically falls open where you need it to.

JOFFE-WALT: There are gatherings like this being held at bank regulatory agencies across Washington, D.C. And here is why:

Congress wrote legislation that says, among many other things, banks need to become safer by holding more capital. Well, how much capital is more capital? That is left up to the regulators. Or later in Section 725 Congress says, derivatives should be regulated. Which derivatives and regulated how exactly?

This is why when the bill passed last summer, Roberta turned to Kymberly and said:

Ms. MCINERNEY: Now, the real work starts. There's also a real sense of terror.

JOFFE-WALT: One of the biggest responsibilities handed to the FDIC is to make it so that banks aren't too big to fail so the government doesn't have to bail them out. Congress wants the FDIC to be able to go in and take over and run enormous troubled banks, just as they do with smaller banks.

So, today's book club conversation: If the FDIC does have to do this, where will the money come from to wind down one of those big giants? Roberta flips to section 206 for discussion.

Ms. MCINERNEY: The FDIC, after 30 days, we can borrow an amount that's equal to 90 percent of the fair value of the total consolidated assets of each company that are available for repayment.

JOFFE-WALT: She stops here briefly for emphasis, with raised eyebrows, as if to indicate, well, obviously here is where the interesting part is:

Ms. MCINERNEY: I mean, as a lawyer this is probably maybe boring for people, but as a lawyer, well what does the term fair value mean? The term fair value is not defined.

JOFFE-WALT: Discussion ensues. Does fair value mean market value? And 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 a little bit 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.

Mr. BART CHILTON (Commissioner, U.S. Commodity Futures Trading Commission): Those folks, instead of focusing on Congress, 'cause the bill has passed are now focusing on regulators.

JOFFE-WALT: This is Commissioner Bart Chilton - another regulator - at the Commodities Futures and Exchange Commission.

Mr. CHILTON: We are having meetings like crazy. Folks are in talking with us about what they want. We are far outnumbered.

JOFFE-WALT: The women at the FDIC say they try to do their best to steer clear of undue influence as they write their 44 rules. And they say to do so, they try to stick to "The Book."

Chana Joffe-Walt, NPR News.

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