Wednesday, June 17, 2009

The Obama Regulatory Reform Plan

by Bill McBride on 6/17/2009 12:55:00 PM

From the Treasury: President Obama to Announce Comprehensive Plan for Regulatory Reform

President Obama will lay out a comprehensive regulatory reform plan this afternoon to modernize and protect the integrity of our financial system. ... The President will be joined by Treasury Secretary Tim Geithner, representatives from the regulatory community, consumer groups, the financial industry and members of Congress for an event in the East Room later this afternoon.
And a little reading material ...

White Paper: Requiring Strong Supervision And Appropriate Regulation Of All Financial Firms

Strengthening Consumer Protection

Providing The Government With Tools To Effectively Manage Failing Institutions

Improving International Regulatory Standards And Cooperation

A few excerpts:
We propose the creation of a Financial Services Oversight Council to facilitate information sharing and coordination, identify emerging risks, advise the Federal Reserve on the identification of firms whose failure could pose a threat to financial stability due to their combination of size, leverage, and interconnectedness (hereafter referred to as a Tier 1 FHC), and provide a forum for resolving jurisdictional disputes between regulators.
...
Any financial firm whose combination of size, leverage, and interconnectedness could pose a threat to financial stability if it failed (Tier 1 FHC) should be subject to robust consolidated supervision and regulation, regardless of whether the firm owns an insured depository institution.
...
Capital and management requirements for FHC status should not be limited to the subsidiary depository institution. All FHCs should be required to meet the capital and management requirements on a consolidated basis as well.
emphasis added
CR: No off balance sheet nonsense and they propose to regulate the shadow banking system.

On derivatives:
All OTC derivatives markets, including CDS markets, should be subject to comprehensive regulation that addresses relevant public policy objectives: (1) preventing activities in those markets from posing risk to the financial system; (2) promoting the efficiency and transparency of those markets; (3) preventing market manipulation, fraud, and other market abuses; and (4) ensuring that OTC derivatives are not marketed inappropriately to unsophisticated parties.