Henry Paulson Shows Off His New Regulatory Plan
As expected Treasury Secretary Henry Paulson brought out the new 218 page regulatory plan for the financial world today. The plan has been reported to introduce the most sweeping changes in regulations that apply to the banking industry and the financial markets since The Great Depression of 1929.
The Plan was brought to like in the Treasury Department’s Cash Room. (How appropriate!) Apparently, the plan is bringing criticisms from some states because it would put the federal government in the position of overriding state regulations of securities and insurance. Among the first to speak out was William Galvin, Secretary of the Commonwealth of Massachusetts who said the plan was “a disastrous backward step that would put the investor in jeopardy”. (What about the consumer?)
What does the plan actually do?
The main elements of the Bush administration’s plan to overhaul financial regulation:
— Expand the role of the President’s Working Group on Financial Markets to include the entire financial sector and not just financial markets.
— Create a federal commission, the Mortgage Origination Commission, to develop uniform, minimum licensing standards for mortgage market participants.
— Close the Office of Thrift Supervision, which regulates thrift institutions, and move those functions to the Office of the Comptroller of the Currency, which regulates banks.
— Merge the functions of the Commodity Futures Trading Commission into the Securities and Exchange Commission to create one agency to provide unified oversight of the futures and securities industries.
— Establish an Office of National Insurance within the Treasury Department to regulate those in the insurance industry who want to operate under an optional federal charter.
— Work to establish as a long-term goal three major regulators: the Federal Reserve as a “market stability regulator”; a “prudential financial regulator” to take over the functions of five separate banking regulators; and a “business conduct regulator” to regulate business conduct and consumer protection.
In other words, the plan would eliminate the overlaps in regulatory agenices, trimming five agencies down to one.
It would give the Federal Reserve more power to protect the stability of the entire financial system while merging day-to-day bank supervision into one agency, down from five at present.
It also would create one super agency in charge of business conduct and consumer protection, performing many of the functions of the current Securities and Exchange Commission.
It would propose eliminating the Office of Thrift Supervision and the Commodity Futures Trading Commission, merging their functions into other agencies.
It would ask Congress to establish a federal Mortgage Origination Commission to set recommended minimum licensing standards for mortgage brokers, many of whom now operate outside of federal regulation, and it would also take a first step toward federal regulation of the insurance industry by asking Congress to establish an Office of Insurance Oversight inside the Treasury Department.
Well, that all seems like a lot of changes, good or bad, but the truth is at this point in time it’s nothing more than a plan that will take years to implement… if ever. Congress will have to vote on the changes and there will be hearings and scrutinizing for God knows how long before any action is taken.
And, the bottom line… the plan won’t do one thing to help the economic crisis today. And, for the most part, it does little to help Main Street, now or in the future.
Take a look at Henry Paulson’s presentation:
[...] to say, the Regulatory Plan laid out by Secretary of Treasury Paulson is the talk of the day. It didn’t slide onto the [...]