News
The Big Story: Sweeping changes planned for money regulations
By Martin Crutsinger, AP Economics Writer
WASHINGTON, D.C.—The Bush administration is trying to confront the credit crisis that has rattled nerves from Wall Street to Main Street by proposing wholesale changes in how Washington oversees the financial system.
A plan set for release Monday would give new powers to the Federal Reserve so that the central bank serves as the system’s overarching protector of stability.
The proposal would abolish agencies such as the Office of Thrift Supervision and the Commodity Futures Trading Commission, shifting their responsibilities to other federal institutions.
When Treasury Secretary Henry Paulson outlines the ideas in a speech, the changes will represent the most sweeping overhaul of financial regulation since the Great Depression of the 1930s.
The Associated Press obtained a 22-page executive summary of the proposal. Under the current hodgepodge, institutions that take deposits and are federally insured face multiple regulatory bodies. By contrast, hedge funds, private equity firms and investment banks endure substantially less regulation.
The credit crisis that has rocked Wall Street and made credit hard to get on Main Street has highlighted that discrepancy in regulation.
Many financial institutions have declared billions of dollars in losses stemming from soaring mortgage defaults caused by prolonged housing troubles.
In an unprecedented move designed to get credit flowing again, the Fed is allowing investment banks to borrow directly from the Fed, something only commercial banks had the power to do before.
The Fed’s moves have put public money potentially at risk and increased calls for greater regulation of investment banks and other institutions.
The Paulson plan is expected to generate intense debate in Congress, which would have to approve the changes.
David Nason, Treasury’s assistant secretary for domestic finance, said the administration’s primary goal is to get through the current credit crisis with officials understanding that the debate over an overhaul plan this far-reaching could last for years.
“These are very complex issues that require a serious amount of debate,” he said in an AP interview Saturday.
The Paulson plan would:
designate the Fed as the primary regulator for market stability, greatly expanding its ability to examine any financial institution deemed to pose a risk to the stability of the system.
shift the functions of the Office of Thrift Supervision to the Office of the Comptroller of the Currency, although ultimately the plan envisions just one banking regulator.
merge the Securities and Exchange Commission with the Commodity Futures Trading Commission.
create a national regulator for insurance companies, which now are largely regulated by the states.
establish a commission to address the abuses exposed in the current tidal wave of mortgage defaults.
A plan set for release Monday would give new powers to the Federal Reserve so that the central bank serves as the system’s overarching protector of stability.
The proposal would abolish agencies such as the Office of Thrift Supervision and the Commodity Futures Trading Commission, shifting their responsibilities to other federal institutions.
When Treasury Secretary Henry Paulson outlines the ideas in a speech, the changes will represent the most sweeping overhaul of financial regulation since the Great Depression of the 1930s.
The Associated Press obtained a 22-page executive summary of the proposal. Under the current hodgepodge, institutions that take deposits and are federally insured face multiple regulatory bodies. By contrast, hedge funds, private equity firms and investment banks endure substantially less regulation.
The credit crisis that has rocked Wall Street and made credit hard to get on Main Street has highlighted that discrepancy in regulation.
Many financial institutions have declared billions of dollars in losses stemming from soaring mortgage defaults caused by prolonged housing troubles.
In an unprecedented move designed to get credit flowing again, the Fed is allowing investment banks to borrow directly from the Fed, something only commercial banks had the power to do before.
The Fed’s moves have put public money potentially at risk and increased calls for greater regulation of investment banks and other institutions.
The Paulson plan is expected to generate intense debate in Congress, which would have to approve the changes.
David Nason, Treasury’s assistant secretary for domestic finance, said the administration’s primary goal is to get through the current credit crisis with officials understanding that the debate over an overhaul plan this far-reaching could last for years.
“These are very complex issues that require a serious amount of debate,” he said in an AP interview Saturday.
The Paulson plan would:
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