Paulson Proposes Financial Overhaul
lazymoon13
Posts: 838
what do you guys think about this?
http://biz.yahoo.com/ap/080331/fed_overhaul.html
Administration Unveils Sweeping Plan to Overhaul Financial Regulation
WASHINGTON (AP) -- The Bush administration Monday proposed the most far-ranging overhaul of the financial regulatory system since the stock market crash of 1929 and the ensuing Great Depression.
The plan would change how the government regulates thousands of businesses from the nation's biggest banks and investment houses down to the local insurance agent and mortgage broker.
ADVERTISEMENT
Treasury Secretary Henry Paulson unveiled the 218-page plan in a speech in Treasury's ornate Cash Room. He declared that a strong financial system was important not just for Wall Street but also for working Americans.
The administration's plan was already drawing criticism from Democrats that it does not go far enough to deal with abuses in mortgage lending and securities trading that were exposed by the current credit crisis.
The plan, which would require congressional approval for its biggest changes, seeks to trim a hodge-podge collection of overlapping jurisdictions that date back to the Civil War.
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.
Paulson acknowledged in his remarks that most of the changes will not occur until after a lengthy debate in Congress, leaving it to the next administration to deal with the biggest changes proposed by the report. He also said the Bush administration's focus would remain on getting through the current severe credit crisis, which has roiled financial markets since last August.
President Bush's aides said Monday after the announcement that Bush was happy to let Paulson be the lead figure on this issue.
"The president's point of view is that he trusts Secretary Paulson to put forward what he thinks is a constructive plan," White House press secretary Dana Perino told reporters traveling with Bush aboard Air Force One to Ukraine on Monday.
She said administration officials will work with lawmakers in hopes of having constructive conversations. Asked if Bush's goal is to get the overhaul approved before he leaves office, Perino said: "We'll have to see. It's a big attempt."
"Secretary Paulson has been working on this package for about a year, so it's not like pulling a rabbit out a hat," Perino added. "It's very constructive, deliberate thinking amongst the best minds in economics."
For his part, Paulson rejected Democratic charges that it was lax regulation of mortgage brokers and the financial industry that had led to the current problems.
"I do not believe it is fair or accurate to blame our regulatory structure for the current market turmoil," he said. "I am not suggesting that more regulation is the answer or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to 10 years."
Banking groups raised strong objections to the plan while other industry groups had mixed reactions.
"Dismantling the thrift charter and crippling state banking charters will weaken banking in America," said Edward Yingling, president of the American Bankers Association.
In Congress, House Financial Services Committee Chairman Barney Frank, who is working on his own regulatory revamp, called Paulson's proposal a "constructive step forward" but said it wouldn't give the Federal Reserve enough authority to carry out its expanded job to police the stability of the entire financial system.
Many Democrats said that Congress' first priority should be to deal with the current mortgage crisis that is threatening millions of Americans with the loss of their homes and that an extensive debate on a regulatory overhaul should not occur until a new president is in office next year.
Senate Banking Committee Chairman Christopher Dodd, D-Conn., said in an appearance on CBS' "Early Show" that it was not a failure of the regulatory scheme but "a failure of leadership" that led to the current crisis.
The proposed overhaul would be the most extensive since the current regulatory system was created in response to the 1929 stock market crash and the Great Depression.
It comes at a time when the financial system faces its most severe credit crisis in two decades, one that has resulted in billions of dollars of losses for big banks and investment houses and the near-collapse of Bear Stearns, the country's fifth-largest investment bank.
The rising tide of bad debt has made it harder for consumers and businesses to get credit, further weighing on an economy struggling with a prolonged housing slump and soaring energy prices. Many economists believe the country is already in a recession.
http://biz.yahoo.com/ap/080331/fed_overhaul.html
Administration Unveils Sweeping Plan to Overhaul Financial Regulation
WASHINGTON (AP) -- The Bush administration Monday proposed the most far-ranging overhaul of the financial regulatory system since the stock market crash of 1929 and the ensuing Great Depression.
The plan would change how the government regulates thousands of businesses from the nation's biggest banks and investment houses down to the local insurance agent and mortgage broker.
ADVERTISEMENT
Treasury Secretary Henry Paulson unveiled the 218-page plan in a speech in Treasury's ornate Cash Room. He declared that a strong financial system was important not just for Wall Street but also for working Americans.
The administration's plan was already drawing criticism from Democrats that it does not go far enough to deal with abuses in mortgage lending and securities trading that were exposed by the current credit crisis.
The plan, which would require congressional approval for its biggest changes, seeks to trim a hodge-podge collection of overlapping jurisdictions that date back to the Civil War.
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.
Paulson acknowledged in his remarks that most of the changes will not occur until after a lengthy debate in Congress, leaving it to the next administration to deal with the biggest changes proposed by the report. He also said the Bush administration's focus would remain on getting through the current severe credit crisis, which has roiled financial markets since last August.
President Bush's aides said Monday after the announcement that Bush was happy to let Paulson be the lead figure on this issue.
"The president's point of view is that he trusts Secretary Paulson to put forward what he thinks is a constructive plan," White House press secretary Dana Perino told reporters traveling with Bush aboard Air Force One to Ukraine on Monday.
She said administration officials will work with lawmakers in hopes of having constructive conversations. Asked if Bush's goal is to get the overhaul approved before he leaves office, Perino said: "We'll have to see. It's a big attempt."
"Secretary Paulson has been working on this package for about a year, so it's not like pulling a rabbit out a hat," Perino added. "It's very constructive, deliberate thinking amongst the best minds in economics."
For his part, Paulson rejected Democratic charges that it was lax regulation of mortgage brokers and the financial industry that had led to the current problems.
"I do not believe it is fair or accurate to blame our regulatory structure for the current market turmoil," he said. "I am not suggesting that more regulation is the answer or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to 10 years."
Banking groups raised strong objections to the plan while other industry groups had mixed reactions.
"Dismantling the thrift charter and crippling state banking charters will weaken banking in America," said Edward Yingling, president of the American Bankers Association.
In Congress, House Financial Services Committee Chairman Barney Frank, who is working on his own regulatory revamp, called Paulson's proposal a "constructive step forward" but said it wouldn't give the Federal Reserve enough authority to carry out its expanded job to police the stability of the entire financial system.
Many Democrats said that Congress' first priority should be to deal with the current mortgage crisis that is threatening millions of Americans with the loss of their homes and that an extensive debate on a regulatory overhaul should not occur until a new president is in office next year.
Senate Banking Committee Chairman Christopher Dodd, D-Conn., said in an appearance on CBS' "Early Show" that it was not a failure of the regulatory scheme but "a failure of leadership" that led to the current crisis.
The proposed overhaul would be the most extensive since the current regulatory system was created in response to the 1929 stock market crash and the Great Depression.
It comes at a time when the financial system faces its most severe credit crisis in two decades, one that has resulted in billions of dollars of losses for big banks and investment houses and the near-collapse of Bear Stearns, the country's fifth-largest investment bank.
The rising tide of bad debt has made it harder for consumers and businesses to get credit, further weighing on an economy struggling with a prolonged housing slump and soaring energy prices. Many economists believe the country is already in a recession.
Post edited by Unknown User on
0
Comments
The government getting involved with the economy never leads to good things essentially but unfortunately the idiots in charge at Wall Street have brought this on themselves.
The Crash of 1929 and all those social programs have bred the horrid hulking beast of government that we have today.
Sure they worked great then in the short term and 70 some odd years of tweeking and making sure X politician gets his pork in later... this is the result...
Ineffective government and Ineffective corporations
Lots of programs... lots of talk... a lot of bullshit at the end of it.
Government intervention is great for short periods of hardship... the problem is they never give the power back to the people.
It's not really regulation that's the problem... it's individuals that are unethical jerks and that's going to happen regardless of regulation and you can ALWAYS buy off officials. People on these levels do not live within the confines of the law... they live on the edge of what they can get away with all the regulation in the world isn't changing that... the new rules will be just as effective as the war on drugs.
Sorry, I'm synical. I just don't see how this does anything positive for people on any level in the long run. At some point, Americans need to take responsibility for thier actions at every economic level. The bill comes due at some point and you have to pay it. Living far beyond your means = catastrophe
I had Paulson up on my screen on CNBC this morning, but paid him little attention.
I did catch a whiff of some changes the FED wants from Squakbox this morning, and i have to say i was VERY disturbed.
Like Pacomc79 said, "why not just go pure communist?"
The changes the Fed is seeking are those such that they have the authority to REQUIRE INSTITUTIONS TO DISPOSE OF AN ENTIRE ASSET CLASS should they deem that the institutions particular holdings are in danger of causing "systemic risk to the system".
Obviously this raises the question, "how does the Fed make that determination"?
Further, given the Feds clear vested interest in protecting certain players in the game -- like it's recent favoritism of JP Morgan Chase, a bank which OWNS SIGNIFICANT SHARE IN THE FED! - it rasies a LOT of concerns for me about its abuse of this power to force the disadvantage of competitors.
If anyone is familiar with the "Savings And Loan 'Scandal' of the 80s" ... one may be aware that what the government did here was impose massively destructive regulation upon the S&L industry in what was generaly not understood by the public to be massive favoritism to the banks.
Basicaly what happened was some these Savings & Loan institutions were holding private sector bonds which were yielding high returns. The joke is, that the problem with the S&L institutions had NOTHING to do with these holdings. Only 5% of all S&L instutions were holding these bonds, at a total of 1.2% of ALL S&L assets! Further, these were actualy for the most part sound investments. The high returns were not so much a function of the risk underlying the companies issuing the bonds, so much as it was that these were small companies that had traditionaly not been in favor for lending with the large banks -- therefore to secure financing, they had to offer higher returns.
However, this was becoming hugely problematic for the large banks because it indicated a shift in financing back away from the banks and in favor of private investment and small business. Therefore the banks had to think of a way to twist the arm of these people and force them to dump their holdings. What they did was work with the government to get these bonds deemed "JUNK" (even though they werent) and then get the government to FORCE the local savings & loan institutions to all dispose of their "junk" bonds en masse.
What did this do?
It was a self fulfilling prophecy ... they called it junk, and forced an entire industry to dispose of this asset class simultaneously, and what happened?
Well of course the market was flooded with "junk" bonds, and then, oh wow, what a coink-i-dink ... those bonds all became "junk" ... why? Because the federal government had forced private enterprise to dispose of those assets so fast that the market was overflowing with them, and the players that had been holding those assets were barred from reaquiring them. [btw, almost all of that is paraphrased from Creature From Jekyll Island, my new favorite book on this type of stuff. lol]
So,
i'll have to read up on what Paulson is proposing specificaly,
but of what i heard this morning, there are some very troubling proposals on the table right now.
:( :( :(
If I opened it now would you not understand?