Back on 2/3/08 Treasury Secretary, Henry Paulsen, announced a proposal to overhaul the U.S. financial regulatory system that is the broadest sweeping such plan since the stock market crash of 1929. It is called the Blueprint for Regulatory Reform.
The plan calls for a broad expansion of the Federal Reserve’s powers, allowing the Fed to exercise greater powers to oversee and ensure the stability of the country’s financial system, instead of relying on the traditional, but limited market rate-adjustment mechanisms it utilizes to steer monetary policy.
Specifically, the Fed, under Paulsen’s plan, would gain oversight of Wall Street securities firms and streamline the number of current bureaucratic regulatory agencies from five down to one. A mega-agency would thus emerge and perform the duties previously done by the Office of Thrift Supervision, as well as merge the Securities and Exchange Commission with the Commodity Futures Trading Commission, which agencies would then be dissolved.
There has been very divided reaction to this plan so far. Some believe it would create a better-streamlined agency that could respond to financial crises with greater ability, effectiveness and faster measures. However, some are concerned that, at least in the short run, it would not be a good idea because the Fed’s new oversight would only be exercised when in a crisis and not beforehand, based upon the oversight and intervention it would exercise. Most, however, believe that this plan is going in the right direction and is, at least, is a first start toward needed and more updated regulatory reform.
Mr. Paulsen has stated before Congress and elsewhere that simply more regulation is not the answer. Rather, a regulatory model that has the authority and power to exert greater intervention would enhance greater financial stability and effective regulatory reform while not “socializing” the markets with too much governmental regulation and control.
The plan calls for a broad expansion of the Federal Reserve’s powers, allowing the Fed to exercise greater powers to oversee and ensure the stability of the country’s financial system, instead of relying on the traditional, but limited market rate-adjustment mechanisms it utilizes to steer monetary policy.
Specifically, the Fed, under Paulsen’s plan, would gain oversight of Wall Street securities firms and streamline the number of current bureaucratic regulatory agencies from five down to one. A mega-agency would thus emerge and perform the duties previously done by the Office of Thrift Supervision, as well as merge the Securities and Exchange Commission with the Commodity Futures Trading Commission, which agencies would then be dissolved.
There has been very divided reaction to this plan so far. Some believe it would create a better-streamlined agency that could respond to financial crises with greater ability, effectiveness and faster measures. However, some are concerned that, at least in the short run, it would not be a good idea because the Fed’s new oversight would only be exercised when in a crisis and not beforehand, based upon the oversight and intervention it would exercise. Most, however, believe that this plan is going in the right direction and is, at least, is a first start toward needed and more updated regulatory reform.
Mr. Paulsen has stated before Congress and elsewhere that simply more regulation is not the answer. Rather, a regulatory model that has the authority and power to exert greater intervention would enhance greater financial stability and effective regulatory reform while not “socializing” the markets with too much governmental regulation and control.
The Blueprint for Regulatory Reform will have to makes its way through the scrutiny and consideration of Congress. It is anticipated that this will take a great deal of time and any reform will probably not become reality until the next administration.
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