Treasury Secretary Paulson Calls For Total Regulatory Revamp of Financials

NEW YORK - March 29 2008 - U.S. Treasury Secretary Henry Paulson plans to call for extensive, wide-ranging reforms to the way the government regulates financial markets, including proposals to give the Federal Reserve more power and create new bodies to monitor mortgages and other transactions.

The many items in the Treasury plan include a proposal to make the Fed “responsible for overall issues of financial market stability,” according to the executive summary.

In addition to the Fed’s current powers to provide liquidity through its monetary policy tools, the central bank “should be provided with a different, yet critically important regulatory role and broad powers focusing on the overall financial system,” the document said.

The new role would include “the responsibility and authority to gather appropriate information, disclose information, collaborate with the other regulators on rule writing, and take corrective actions when necessary in the interest of overall financial market stability,” it said, adding that this was a “long-term” component of the plan.

The Treasury Department proposal would merge some regulatory bodies, while creating others.
Under the plan, the Securities and Exchange Commission and the Commodity Futures Trading Commission would be combined into a single market-watching body. Similarly, the Office of Thrift Supervision - which currently oversees federal thrift banks and credit unions — would be folded into the Office of Comptroller of the Currency to create a unified banking regulator.

Among the new agencies envisioned in the proposal is a new “Mortgage Origination Commission,” which would develop standards for state mortgage market participants. The body would be run by a presidential appointee and a board with representatives from the Fed, the Federal Deposit Insurance Corporation and other existing government bureaus.

The plan also calls for beefing up the President’s Working Group on Financial Markets, an inter-agency body founded in the aftermath of the 1987 stock market crash. It said the group’s “focus should be broadened to include the entire financial sector, rather than solely financial markets.”

Reports Saturday said Paulson will formally present the new proposals Monday, adding that the reshuffle of responsibilities could ignite turf wars among the various agencies involved.

Paulson calls for total regulatory revamp
by Michael Kitchen | MarketWatch