Vol. 2001-10 

“To every thing there is a season . . .”

             My favorite Book of the Old Testament is Ecclesiastes, Chapter 3 of which introduces its catalogue of ever-changing human interests with: “To every thing there is a season, and a time to every purpose . . .”  These words occurred to me when I realized that, once again, the approaching end of the old year and the impending start of the new is a special time.  For persons who focus on significant public policies affecting banking and finance, it offers the opportunity to assess what the proceeding twelve months had revealed and to peer, however dimly, into the next twelve.  For the latter, Ecclesiastes offers some reason for confidence, although accompanied by an enigmatic warning.  It assures us “that which is done is that which shall be done: and there is no new thing under the sun.”  But at the same time, success in divining the future may not be desirable: “For in much wisdom is much grief: and he that increaseth knowledge increaseth sorrow.”  However, I am not too disturbed by this because of my hunch that many readers of this report are not likely to conclude that I have displayed “much wisdom.”

             The year now ending has been unusual, to say the least, because of the terrorist attack of September 11 and the increasing evidence that we are in a new and quite different kind of war.  When I flipped back to last December’s final report I was reminded that it, too, had been written during an unusual period.  Last year in early December there was still no President-elect and no clear idea as to the structure of the new Congress, particularly on the Senate side.  There is, after all, a close connection between the formulation of public policies in banking and finance and the political environment in which this will take place.  There was not much doubt then about what the key policy issues would be but, rather, about how the environment might shape the solutions.  Today’s environment is having a much different effect.  It is not so much how important policy issues may be resolved but, rather, a question of what new issues will come to the fore, and which formerly important matters will be put aside for a time or, if addressed, will not receive the full attention of the Administration and the Congress.

             Here I can only offer impressions.  For example, prior to September 11 it appeared that privacy would rank high among policy questions to be resolved.  However, the steam behind “privacy” began to disappear, beginning with the rejection by the California legislature of a ground-breaking financial privacy “opt-in” law on September 15.  Very soon, headlines such as: “Security Bumping Privacy from Top of the Agenda,” began to appear.  (American Banker, September 17 and 19, 2001).  Another likely candidate for action in the coming year was deposit insurance reform, but aside from some minor tinkering the prospect for significant reform legislation in 2001 was declared unlikely by FDIC Chairman Don Powell “because of the terrorist attack.”  He was also dubious about any progress until late in 2002 (American Banker, September 21, 2001).  There have been recent rumblings about possible efforts to take still another fling at regulatory structure reform, but how seriously this will proceed is not yet clear (American Banker, November 26, 2001).  On the other hand, illustrative of the security issues likely to move to the head of the line would be the rash of legislative proposals, from both the Administration and the Congress, dealing with money laundering.  (American Banker, October 1, 2001)

             Nonetheless, I assume that important public policy issues – such as capital regulation or reform of the federal agency structure – cannot be put aside for too long.  Because these and others were covered in earlier reports, often in considerable detail, in this year-end wrap up I will simply identify each issue in a few paragraphs, report on any recent developments, and suggest how I think the issue is likely to play out in 2002 or later.  The report is therefore likely to be fairly short – something that should sit well with readers in this Holiday Season.