Treasury Secretary Henry Paulson Monday unveiled the most wide-ranging plan to overhaul the U.S. financial regulatory system since the Great Depression.
The current regulatory systems should work "more effectively to promote stable and resilient markets and a more competitive financial services industry," Paulson said in a speech outlining the Treasury's regulatory reform blueprint.
"Our first and most urgent priority is working through this capital market turmoil and housing downturn, and that will be our priority until this situation is resolved," Paulson said. "With a few exceptions, the recommendations in this blueprint should not and will not be implemented until after the present market difficulties are past."
The short-term recommendations include improvements to regulatory coordination and oversight that regulators can make quickly. The blueprint recommends creating a new federal commission for mortgage origination to protect consumers better. The report also recommends modernizing the President's Working Group on Financial Markets and clarifying the Federal Reserve's liquidity provisioning.
Treasury Secretary Henry Paulson Monday makes a speech at a news conference, unveiling the most wide-ranging plan to overhaul the U.S. financial regulatory system since the Great Depression. (Xinhua Photo) The Mortgage Origination Commission (MOC) "would evaluate, rate and report on each state's adequacy for licensing and regulation of participants in the mortgage origination process," Paulson said.
Treasury Secretary Henry Paulson Monday listens to questions at a news conference. He unveiled the most wide-ranging plan to overhaul the U.S. financial regulatory system since the Great Depression. (Xinhua Photo) Mid-term recommendations focus on eliminating some of the duplication in U.S. existing regulatory system, but more importantly they offer ways to modernize the regulatory structure for certain financial services sectors, within the current framework. Recommendations include eliminating the thrift charter, creating an optional federal charter for insurance and unifying oversight for futures and securities.
The long-term recommendation is to create an entirely new regulatory structure using an objectives-based approach for optimal regulation. The structure will consist of a market stability regulator, a prudential regulator and a business conduct regulator with a focus on consumer protection.
Analysts said according to the plan, the U.S. government will merge the Securities and Exchange Commission with the Commodity Futures Trading Commission, bringing oversight of U.S. securities and futures markets under a single regulatory umbrella.
The plan would give Federal Reserve more power to oversee Wall Street securities firms which now have access to the central bank's emergency lending facilities.
"The Fed would have the authority to go wherever in the system it thinks it needs to go for a deeper look to preserve stability," said Paulson.
He acknowledged that his plan will take years to complete and extend beyond the current period of market turmoil.
"Once we are through this period of market stress, we need to begin the serious work of modernizing and reforming the structure, which will require a great deal of discussion and many years to complete," he said.
"We will not seek to implement (the plan) on a pace or in a manner that interferes with our first priority of working through this current period of market difficulty," Paulson said.
House Financial Services Committee Chairman Barney Frank welcomed Paulson's ambitious plan, saying it was a "constructive step forward." But he also said Congress would not give the Federal Reserve more powers under this plan.
Frank's reactions were echoed by some banking groups.
"Dismantling the thrift charter and crippling state banking charters will weaken banking in America," Edward Yingling, president of the American Bankers Association, was quoted as saying.
Source: Xinhua
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