http://english.aljazeera.net/NR/exeres/3D37BB34-63DF-4A19-98CF-605FD5E0FF3D.htm
US plans finance system overhaul
The Bush administration has proposed widespread changes in how Washington
oversees the financial system.
A plan set for release on Monday would give new powers to the Federal Reserve
(Fed) so that the central bank serves as the system's so-called "protector of
stability".
Financial institutions have in recent months declared billions of dollars in
losses stemming from soaring mortgage defaults caused by prolonged housing
troubles.
According to a 22-page executive summary obtained by The Associated Press news
agency, the plan envisions a three-stage process that would lead to
establishing three main regulatory agencies.
Agencies such as the Office of Thrift Supervision and the Commodity Futures
Trading Commission, would be abolished and their responsibilities shifted to
federal institutions.
Regulatory bodies
Under the current system, institutions that take deposits and are federally
insured face multiple regulatory bodies.
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However, hedge funds, private equity firms and investment banks are subject to
substantially less regulation.
The credit crisis that has rocked Wall Street and made it hard for ordinary
Americans to obtain credit has highlighted the discrepancy in regulation
efforts.
But Henry Paulson, the US treasury secretary who has led the effort to rewrite
regulations, rejects accusations that the current system created the problems.
"I do not believe it is fair or accurate to blame our regulatory structure for
the current turmoil," he said according to a draft of a speech to be given on
Monday.
Sweeping overhaul
The proposed changes would represent the most sweeping overhaul of the
country's financial regulation since the Great Depression of the 1930s.
Christopher Dodd, chairman of the Senate banking, housing and urban affairs
committee said in a statement that the recommendations deserved careful
consideration.
But the Democrat senator said that he believed they "would do little if
anything to alleviate the current crisis".
The US treasury began work on the review in early 2007 and in interviews over
the weekend, officials sought to frame the proposals as an effort to devise a
system that would help keep US companies competitive in an increasingly
connected global economy.
"Despite the fact that there will be a temptation to view this through a lens
of what is happening now in credit markets, this has been a process that has
been going on for a year," David Nason, the treasury's assistant secretary for
domestic finance, said.
"These are very complex issues that require a serious amount of debate."
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