WASHINGTON — President Barack Obama proposed sweeping new "rules of the road” for the nation’s financial system Wednesday, casting the changes as a critically important response to the economic crisis and the greatest regulatory transformation since the Great Depression.
Obama blamed the financial crisis on "a culture of irresponsibility” that he said had taken root from Wall Street to Washington to Main Street, and he said regulations crafted to deal with the depression of the 1930s had been "overwhelmed by the speed, scope and sophistication of a 21st century global economy.”
The Obama plan would give new powers to the Federal Reserve to oversee the entire financial system and would also create a new consumer protection agency to guard against credit and other abuses that played a big role in the current crisis.
With Obama’s proposal, the central bank hopefully will be able deal with the kinds of problems that were allowed to build to such an extent that they ended up overwhelming the system last year, resulting in the collapse of some of America’s largest financial institutions.
Two lawmakers whose committees will play a major role said they would move quickly.
"There will be maybe some debate … but I think we’re all seeking the same results,” said Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee.
He has advocated an alternative plan to strip the Federal Reserve of its regulatory role entirely and create a new consolidated bank regulator who would assume the roles that the Fed and Federal Deposit Insurance Corp. now play in helping regulate state-chartered banks.
"There’s not a lot of confidence in the Fed at this juncture,” Dodd said.
No other options
Asked about Dodd’s criticism of the Federal Reserve, Treasury Secretary Timothy Geithner told reporters at a briefing that the administration had looked at a range of alternatives to giving the Fed expanded powers as a systemic risk regulator and had come to the conclusion that "we do not believe there is a plausible alternative.”
Lawrence Summers, head of the president’s National Economic Council, said that those who believed this power should not reside with the Fed had the responsibility to make the case for some other agency.
The Federal Reserve’s expanded authority and the rest of the new rules would reach into currently unregulated regions of the financial markets such as hedge funds and exotic instruments like credit default swaps.
The plan, laid out in an 88-page white paper, was the result of extensive consultations with members of Congress, regulators and industry groups and represented a compromise from bolder ideas that the administration had examined but ended up abandoning because of heavy opposition.
The regulatory overhaul would eliminate only one agency, the Office of Thrift Supervision, generally considered a weak link among current banking regulators. The beleaguered OTS oversaw the American International Group, whose business insuring exotic securities blew up last fall, prompting a $182 billion federal bailout. OTS also oversaw other high-profile blowups like Countrywide Financial Corp., IndyMac Bank and Washington Mutual Inc.
by the associated press
Obama blamed the financial crisis on "a culture of irresponsibility” that he said had taken root from Wall Street to Washington to Main Street, and he said regulations crafted to deal with the depression of the 1930s had been "overwhelmed by the speed, scope and sophistication of a 21st century global economy.”
The Obama plan would give new powers to the Federal Reserve to oversee the entire financial system and would also create a new consumer protection agency to guard against credit and other abuses that played a big role in the current crisis.
With Obama’s proposal, the central bank hopefully will be able deal with the kinds of problems that were allowed to build to such an extent that they ended up overwhelming the system last year, resulting in the collapse of some of America’s largest financial institutions.
Two lawmakers whose committees will play a major role said they would move quickly.
"There will be maybe some debate … but I think we’re all seeking the same results,” said Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee.
He has advocated an alternative plan to strip the Federal Reserve of its regulatory role entirely and create a new consolidated bank regulator who would assume the roles that the Fed and Federal Deposit Insurance Corp. now play in helping regulate state-chartered banks.
"There’s not a lot of confidence in the Fed at this juncture,” Dodd said.
No other options
Asked about Dodd’s criticism of the Federal Reserve, Treasury Secretary Timothy Geithner told reporters at a briefing that the administration had looked at a range of alternatives to giving the Fed expanded powers as a systemic risk regulator and had come to the conclusion that "we do not believe there is a plausible alternative.”
Lawrence Summers, head of the president’s National Economic Council, said that those who believed this power should not reside with the Fed had the responsibility to make the case for some other agency.
The Federal Reserve’s expanded authority and the rest of the new rules would reach into currently unregulated regions of the financial markets such as hedge funds and exotic instruments like credit default swaps.
The plan, laid out in an 88-page white paper, was the result of extensive consultations with members of Congress, regulators and industry groups and represented a compromise from bolder ideas that the administration had examined but ended up abandoning because of heavy opposition.
The regulatory overhaul would eliminate only one agency, the Office of Thrift Supervision, generally considered a weak link among current banking regulators. The beleaguered OTS oversaw the American International Group, whose business insuring exotic securities blew up last fall, prompting a $182 billion federal bailout. OTS also oversaw other high-profile blowups like Countrywide Financial Corp., IndyMac Bank and Washington Mutual Inc.
by the associated press
No comments:
Post a Comment