From Reuters March 29, 2008 – from Doug Palmer – “Upcoming Treasury department proposal to make the Federal Reserve the cheif regulator of U.S. financial markets and give it sweeping new powers.”
An executive summary of the Treasury proposals says a “market stability regulator” is needed and the Fed best fits that role, suggesting the central bank could use its control over interest rates as well as its ability to provide market liquidity to fulfill its functions.
“It’s become clear, I think to all, that the solution at this point is not to simply layer on more layers of regulation on a creaky outdated system, but really to step back and modernize the entire structure,” Hirschmann said.
The Paulson plan would:
- Designate the Fed as the primary regulator for market stability, greatly expanding it ability to examine any financial institution deemed to pose a risk to the stability of the system.
- Shift the functions of the Office of Thrift Supervision to the Office of the Comptroller of the Currency, although ultimately the plan envisions just one banking regulator.
- Merge the Securities and Exchange Commission with the Commodity Futures Trading Commission.
- Create a national regulator for insurance companies; they are now largely regulated by the states.
- Establish a commission to try to address the abuses exposed in the current tidal wave of mortgage defaults.