MERGE WATCHDOGS?By Reuters - | Posted 2008-03-31 Email Print
A new regulatory plan will be put in place by Treasury Secretary Henry Paulson in response to mounting recessionary trends in the economy.
Among changes, Treasury wants to merge the Securities and Exchange Commission, the U.S. markets watchdog, with the Commodity Futures Trading Commission that is charged with overseeing the activities of the nation's futures market.
It also recommends getting rid of a Depression-era charter for thrifts that was intended to make it easier to obtain mortgage loans, saying it is no longer necessary. That would mean closing the Office of Thrift Supervision and transferring its duties to the Office of the Comptroller of the Currency that oversees national banks.
In one important change to try to clamp down on mortgage brokers, Treasury is urging the establishment of a "Mortgage Origination Commission" made up of regulatory agency representatives that would be able to set licensing standards for mortgage brokers.
That would boost consumer protection by increasing scrutiny of the personal conduct, disciplinary history and educational qualifications of the people who are frequently on the lending front lines.
For a variety of reasons, none Treasury's proposals faces an easy future, as the director of Office of Thrift Supervision made clear in a message to employees on the weekend.
"Many of you might be wondering whether financial markets restructuring is an idea whose time has finally come," John Reich told OTS employees. "I don't think so, at least as it pertains to the four federal banking agencies."
Paulson, a 30-year veteran of Wall Street who initiated the regulatory study a year ago, has warned against dampening "innovation" by applying too many rules to the financial services sector and his stance will raise questions.
A draft of a speech Paulson planned for Monday said it was neither "fair or accurate" to blame lax regulation for the current turmoil. Indeed, Treasury started studying regulation in response to financial industry complaints that it was so regulated it was losing business to capital markets in Europe.
Democratic presidential candidate Sen. Barack Obama has pointedly noted that he saw "no call for increased capital reserve requirements and liquidity requirements on investment banks" similar to those of commercial banks, despite the fact the Fed is now lending to investment banks.
A spokesman for Sen. John McCain, who has secured the Republican nomination for November's election, said only that he "looks forward to a healthy debate," effectively saying that any substantive rules change will be slow to come.
Britain's Financial Times newspaper reported on Monday that a working group was being established between Britain and the United States to sketch out the best way to tackle financial market turmoil.
Asked to comment on this report a spokesman for Prime Minister Gordon Brown told reporters in London: "We're very clear that we want to work closer with the U.S. and our other major international partners in dealing with the global financial turbulence."
"This is a global issue that requires a global response."
(additional writing by Gerrard Raven in London)
© Reuters 2008 All rights reserved