The Obama administration gave a sneak peek today of its upcoming financial regulation reform plan. The plan calls for increased powers to the Federal Reserve but backs away from consolidating all banking regulation into one agency. A more detailed version is expected to be released Wednesday.
Treasury Secretary Timothy Geithner and Lawrence Summers, the director of the National Economic Council, outlined five major elements of the administration's proposal in an op-ed piece published today in the Washington Post. Geithner and Summers said that the current financial regulatory system is "riddled with gaps, weaknesses and jurisdictional overlaps, and suffers from an outdated conception of financial risk."
Included in the administration's proposal:
- Greater power to the Fed to oversee large firms whose failures could threaten the stability of the entire financial system
- Stricter capital and liquidity requirements for all institutions
- The creation of a council of regulators, which would have broad coordinating responsibility across the financial system
- Robust reporting requirements on the issuers of asset-backed securities
- A stronger framework for consumer and investor protection across the board
- A reduction in the dependency of investors and regulators on credit-rating agencies
- A requirement that the originator, sponsor, or broker of a securitization have a financial interest in the process
- Stricter international financial standards