Against the backdrop of the United States “facing the greatest financial crisis since the Great Depression,” President Obama is set to release today his Administration’s summary of recommendations detailing how it intends to overhaul the U.S. financial markets.
The plan is an attempt to overhaul an outdated system of financial regulation, the Washington Post quotes senior administration officials as saying.
Made available last night through the Post, the 85-page report details its goals to promote robust supervision and regulation of financial firms, establish comprehensive regulation of financial markets, protect consumers and investors from financial abuse, provide the government with the tools it needs to manage financial crises, and raise international regulatory standards and improve international cooperation.
The report points to gaps and weaknesses in the regulatory system that presented challenges to “our government’s ability to monitor, prevent, or address risks as they built up in the system.”
“While this crisis had many causes, it is clear now that the government could have done more to prevent any of these problems from growing out of control and threatening the stability of our financial system,” the report says.
The plan calls for a new Financial Services Oversight Council of prudent regulators to identify emerging systemic risk, new authority by the Federal Reserve to supervise all firms that could post a threat to financial stability, including those that do not own banks and stronger standards for all financial firms.
The Administration’s document points specifically to challenges raised by American International Group Inc.: “Other firms, such as AIG-owned insured depositories, but escaped the strictures of serious holding company regulation because the depositories that they owned were technically not ‘banks’ under relevant law.”
Calling for a new National Bank Supervisor to supervise all federally chartered banks, the document says the government will eliminate the federal thrift charter “and other loopholes that allowed some depository institutions to avoid bank holding company regulation by the Federal Reserve.”
Along with enhanced regulation of the securitization markets, the plan will require hedge fund advisers to register with the Securities and Exchange Commission. Further, it would give new authority to the Federal Reserve to oversee payment, clearing and settlement systems.
At the consumer level, the Obama plan calls for a Consumer Financial Protection Agency to protect consumers from “unfair, deceptive and abusive practices.”
Finally, international reforms are called for that will support and strengthen the country’s capital framework and improve oversight of global financial markets.
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