Overhaul of financial system would exclude consolidation
Written on June 17, 2009
WASHINGTON — The Obama administration wants to overhaul the country’s financial rule book by giving the Federal Reserve increased powers but, bowing to critics in Congress, is backing away from proposals to consolidate various regulatory agencies.
The administration’s overhaul plan would make the Fed a systemic risk regulator to oversee large institutions whose failure could threaten the stability of the entire system. It also would create a council of regulators with broad coordination responsibility across the financial system, administration officials said.
The administration also would offer a stronger framework for investor protection, including increased oversight of consumer products ranging from credit cards to annuities, officials said.
Speaking in New York on Monday, Treasury Secretary Timothy Geithner said the regulatory overhaul would eliminate "gaps" in the financial system that encouraged risky behavior leading up to the meltdown.
"We had a financial system that was fundamentally too unstable and fragile, and it did a bad job of basic protection of consumers and investors," Geithner said during an economic conference. "Those are things we have to change."
The administration’s regulatory proposals were included as part of an opinion piece by Geithner and Lawrence Summers, director of the president’s National Economic Council, published Monday in The Washington Post everyone approved 1 hour payday loans.
The administration has backed away from a more extensive overhaul that would have consolidated all banking regulation into one agency. A proposal to merge the Securities and Exchange Commission and the Commodity Futures Trading Commission also has been abandoned.
The White House said Monday that Obama would unveil his regulatory overhaul plan on Wednesday.
The officials wrote in the Washington Post that the administration will propose increasing capital and liquidity requirements for all financial institutions and will impose more stringent requirements on the largest and most interconnected firms.
"Like all financial crises, the current crisis is a crisis of confidence and trust," they wrote. "Reassuring the American people that our financial system will be better controlled is critical to our economic recovery."
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