Jun 16 2009 Ted Knutson Recommended
Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers gave a preview of the Administration’s financial regulatory reform wish-list in a Washington Post op-ed piece Monday.
Geithner and Summers said the legislative proposals will focus on five key areas:
1. Improving safety and soundness by raising capital and liquidity requirements for all institutions, with the largest and most interconnected firms getting the most stringent mandates. The Federal Reserve would be anointed the systemic risk cop, and a council of federal financial regulators would be formed to provide a broad look at potential emerging threats to the economic system.
2. Boosting investor confidence in asset-backed securities through stricter reporting requirements for issuers and requiring originators, sponsors and brokers to retain a financial interest to avoid temptations to make overly risky loans as some did in the sub-prime mortgage boom and bust. In addition, the administration proposal would regulate all derivatives contracts and dealers.
3. Increasing consumer and investor protection with the likely proposed creation of a financial products safety panel.
4. Proposing a system to unwind endangered systemically risky firms to prevent future mega-billion taxpayer bailouts of "too large to fail" institutions. Geithner and Summers emphasized that this authority would be only available to federal regulators in "extraordinary circumstances."
5. Improving global financial regulation – but exactly how was left unsaid.
The package is scheduled to be unveiled by the White House Wednesday and Geithner will have opportunities to explain more details Thursday when he testifies before the House Financial Services Committee and the Senate Banking Committee.
