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Kenneth Ehrlich publishes "Plan to Eliminate Federal Savings Banks Is Misguided"

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Banker & Tradesman

Kenneth Ehrlich, co-chair of the firm’s Banking and Financial Services practice, published “Plan to Eliminate Federal Savings Banks Is Misguided” in Banker & Tradesman on July 13. The article discusses the U.S. Treasury Department’s plan to reform the financial services regulatory system. The plan, Financial Regulatory Reform: A New Foundation, identifies causes of the current crises in the financial markets and proposes regulatory changes to the current U.S. system in an effort to prevent similar events in the future. Among other things, the Treasury proposes to eliminate federal savings banks and would require all existing federal savings banks to convert to national banks. To support its position the treasury argues that federal savings banks are both obsolete and redundant, their existence fosters regulatory ‘arbitrage,” and they are especially vulnerable to downturns in the housing market. Ken notes that the Treasury is misguided and that eliminating federal savings banks is not the solution – it will merely exacerbate the problem the next time we have an overheated housing marketing and there are fewer home mortgage lenders to meet demand.

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