A plan in Congress for a single regulator for banks would threaten the entire financial system, argues FDIC chief Sheila Bair.

Federal- and state-chartered banks now have different regulators.

Federal-chartered banks are usually large institutions working across state lines. State-chartered institutions are typically local banks serving their communities, including small towns and rural areas.

A super regulator, Bair asserts in an editorial in The New York Times, would concentrate on large banks, which would encourage consolidation, exactly what we don’t need now.

By putting all our eggs in one basket, the plan would increase the risk of bad or weak regulations, Bair asserts.

Multiple regulators, by contrast, allow diverse viewpoints.

It would also hinder the FDIC’s ability to spot risks to the financial system by stripping its power to supervise state banks. That could hurt the deposit-insurance system.

“This is not about protecting turf,” she writes. “This is about protecting consumers and the safety of our financial system.”

But the idea has backing in Congress.

"Creating a new, consolidated prudential regulator would bring all such oversight under one agency, streamlining regulation and reducing duplication and gaps between regulators," Senator Jack Reed, (D-RI), told the American Banker.

"It would also bring all large, complex holding companies and other systemically significant firms under one regulator," Reed said, "allowing supervisors to finally oversee institutions at the same level as the companies do to manage their own risks."