Sweeping Overhaul Of Fed Proposed

Bush Administration Would Strengthen Reserve's Oversight Of Financial Institutions

(CBS/AP)  The Treasury Department wants to empower the Federal Reserve to force American businesses to clean up their acts: no more bad loans, no more over-extended investments.

The Bush administration is proposing a sweeping overhaul of the way the government regulates the nation's financial services industry from banks and securities firms to mortgage brokers and insurance companies.

CBS News correspondent Kimberly Dozier reports that the plan to be announced Monday, a blueprint of which has been in development for months, would give the Federal Reserve stronger powers of oversight, deputizing teams of Fed "hit men" to hone in on any financial firm they suspect of engaging in risky business - the kind that turns Wall Street bearish and makes it hard to fill the shopping basket or keep a roof over your head.

"Our focus, the focus of policymakers, is on reducing the spillover into the real economy from turbulence and disruptions in our financial markets," Treasury Secretary Henry Paulson said on The Early Show earlier this month.

The plan would also streamline some of the other government agencies regulating finance, merging securities and commodities oversight, for instance.

But Treasury officials won't be calling for any new rules or regulations. Their proposal would simply give them greater powers to examine a company's books, essentially the equivalent of a Big Brother "I'm watching you."

Critics are already saying that none of this would have stopped the sub-prime mortgage crisis, that has led to record house foreclosures across the country.

Dozier reports this plan may not be enough to satisfy lawmakers on Capitol Hill who have to sign off on it - and many of them are already hard at work on their own proposals, which would impose a lot more new regulation.

The administration divided its recommendations into short-term goals that could be adopted quickly, intermediate recommendations and an "optimal" regulatory framework, which contains a radical restructuring of how the government supervises banks and other financial institutions.

The recommendations are the product of a yearlong review that was begun in an effort to modernize the government's regulatory structure so that the country's financial services industries could better compete in a fast-changing global economy.

The plan also seeks to address problems that have been brought to light in recent months since a severe credit crisis began roiling financial markets last August.

That crisis has already claimed as its biggest victim Bear Stearns, the nation's fifth-largest investment bank, which came to the brink of collapse before a government-arranged purchase by JP Morgan Chase & Co.

"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," Paulson will say in the remarks he will deliver on Monday.

But the plan does seek to address problems highlighted by the current crisis in which the Fed in an unprecedented move has begun making direct loans to securities firms in an effort to shore up a system badly shaken by billions of dollars of losses stemming from sour mortgage loans.

The proposal would allow the Fed, in its new role as "market stability regulator," to dispatch examiners to check the books not just of commercial banks but of all segments of the financial services industry.

The administration proposal would also consolidate the current scheme of bank regulation by shutting down the Office of Thrift Supervision and transferring its functions to the Office of the Comptroller of the Currency, which regulates nationally chartered banks.

The plan recommends that the Securities and Exchange Commission, which regulates stock trading, be merged with the Commodity Futures Trading Commission, which regulates futures trades for oil, grains and various other commodities.

The plan would create a national regulator for the insurance industry, which is now largely governed by the states, and would create a Mortgage Origination Commission to try to address the abuses exposed in the current tidal wave of mortgage defaults.

The role Federal Reserve Chairman Ben Bernanke and his colleagues have been playing to shore up the financial system would be formalized in the administration plan by giving Fed officials greater power to detect where threats might be lurking in the system.

The proposal is certain to generate intense scrutiny in Congress and within the financial services industry, where past efforts to change how regulation is handled have met with fierce resistance.

Many Democrats in Congress are already pushing tougher proposals that would impose much stricter regulation in an effort to crack down on abuses exposed by the current credit crisis.

Senator Charles Schumer, a New York Democrat, said he believed Paulson's plan offered some valid suggestions.

"In broad outlines, we agree with large parts of Secretary Paulson's plan," Schumer, chairman of the Joint Economic Committee, said in a statement. "He is on the money when he calls for a more unified regulatory structure, although we would prefer a single regulator to the three he proposes."

Under Paulson's approach, the long-term goal would be to designate the Fed as market stability regulator and to have a financial regulator who would focus on financial institutions that operate with government guarantees such as providing deposit insurance.

The administration plan, which was first reported by The New York Times on its Web site Friday night, also proposes a business conduct regulator who would be in charge of overseeing consumer protection issues.

The initial reaction from the securities industry was also positive.

"Treasury has delivered a thoughtful and sweeping plan which should provoke intense discussion, debate and potential legislative changes," said Tim Ryan, president of the Securities Industry and Financial Markets Association.

"Our present regulatory framework was born of Depression-era events and is not well suited for today's environment where billions of dollars race across the globe with the click of a mouse," Ryan said in a statement.

[alvinsvet]

A woman by the name of Ann Harrison, who sits on the Federal Reserve Board right now, doesn''t bother to apply the few pathetic regulations we do have. Nor does she bother to respond to a ''consumer'' (or a small business owner) who repeatedly requests application of statute, or, at a minimum, an explanation as to why it has not been applied, and the offending lending institution has not been sanctioned for their violation.

She seems to think it is her job to make excuses for lying, law-breaking, financial institutions, much the same way that too many mothers these days make excuses for their delinquent teenagers instead of addressing their corrupt behavior. Some "hit man" (or woman). We need to address the innate female instinct to ''make nice rather than make waves'' in the training of these people before they are handed positions of authority and discipline (ditto before we put a female in an even higher position of authority...)

from an independent, self-disciplined, rural, female, Pennsylvanian, business owner, who is completely fed up with the Fed.

[alvinsvet]

A woman by the name of Ann Harrison, who sits on the Federal Reserve Board right now, doesn''t bother to apply the few pathetic regulations we do have. Nor does she bother to respond to a ''consumer'' (or a small business owner) who repeatedly requests application of statute, or, at a minimum, an explanation as to why it has not been applied, and the offending lending institution has not been sanctioned for their violation.

She seems to think it is her job to make excuses for lying, law-breaking, financial institutions, much the same way that too many mothers these days make excuses for their delinquent teenagers instead of addressing their corrupt behavior. Some "hit man" (or woman). We need to address the innate female instinct to ''make nice rather than make waves'' in the training of these people before they are handed positions of authority and discipline (ditto before we put a female in an even higher position of authority...)

from an independent, self-disciplined, rural, female, Pennsylvanian, business owner, who is completely fed up with the Fed.

[tucano2]

Another power grab by those wonderful people that have
handled so well items
such as Iraq, Afghanistan, Hurricane Katrina, "Made in
China", Illegal
Aliens, Graft/Corruption/Halliburton/Attorney
General/Ramos & Compion/value
of dollar vs. Euro or Yen or Peso etc./Scooter
Libby/Chinese Spies/***
Cheney/Supreme Court/Gray Wolf Hunting/Caribou
Killing/Water
Acidification/A.W.O.L. from Texas Air National Guard
while dodging service
in Vietnam/D.U.I./you name it. What idiot now would go
along with anything
"W" proposes, without risking his own life or that of
our once wonderful
country?

[Gary Kempf]

Anther case by the Fed, OOP''s, My Bad. I guess maybe we should of been watching this earlier???

[forthepeopl1]

well well well, isn''t this a great day for americans??

not, sect.paulson freinds at country wide,got what over 15 million dollars today for their help in putting millions of home owners in bankrupy, and foreclosers.

now MR.POTATOHEAD PAULSON, WANT TO EVEN GIVE MORE POWER TO THE FEDS AND HIMSELVES TO HELP HIS BUDDIES ON WALLSTREET,

REMEMBER THEY BOTMR POTATOHEAD PAULSON AND THE FED BEN CAME FROM WALLSTREET.

THINK ABOUT THIS, WE DONT HAVE THE MOFFIA OUT IN THE OPEN ANYMORE, THEY ARE IN CONTROL OF AMERICA''S MONEY I DO BELEIVE THIS IS TRUE,. WHEN WILL AMERICANS PUT OUR FOOT DOWN.

TIME TO BURN DOWN WASHINGTON AGAIN...TIME FOR A AMERICAN REVOLUTION.

[brianbwb-2009]

"...cut the corporate tax rates in order to stimulate growth on the commercial side. As "bad" as it may sound, doing that will allow american corporations to grow. This will provide more jobs, more real money, and lead to higher tax revenues. We also need to cut the *** out of the federal budget." Posted by mcharlton4

This is just more of the Reaganesque "trickle down" economics that are a proven failure. Reduce corporate tax rates, they will soak up the cash and pay it as dividends, or more likely find corrupt ways to pocket the windfall. Any job growth that might result will be in slave labor countries, which will be expanded with any extra capital. This "solution" has been in place since the days of Reagan, and is the main reason we are in the situation of present.

[mcharlton]

Right now, we have slow spending due to bad loans. That''s a real problem. This problem will not only slow spending, but it devalues the dollar at the same time. The term is stagflation. If the fed keeps doing what they''re doing, it''ll only get much worse.

Right now spending has exceeded the amount of money our economy has. That''s how our economy crashed in the first place. In other we''ve become addicted to the low rates and spending went out of control. If the fed keeps lowering rates, our dollar will keep declining. The declining dollar keeps oil prices high. Until the dollar can be brought under control, oil and food will spike any hopes of a healthy recovery.

The problem is that the solution is unpopular; right before the election. I suspect the feds know this. We have to bring spending in line to our money. It either requires the fed raising consumer rates and let the economy sink further so we can shake out the bad debt. Lower consumer rates can artifically stimulate the economy, but as we''ve seen, it''s not sustainable.

Or we can do what liberals and Democrats hate; cut the corporate tax rates in order to stimulate growth on the commercial side. As "bad" as it may sound, doing that will allow american corporations to grow. This will provide more jobs, more real money, and lead to higher tax revenues. We also need to cut the *** out of the federal budget.

[incog-nito]

Just a pretext for Bush to transfer money from the many into the hands of the few.

[lorinkundert]

A good start would be to prove that the 17th Amendment was legally ratified since I can find no evidence of it, and how about the 16th as well.

[rgmiron]

I do not understand why the FED Res. and the Bush administration have chosen to support the wealthy and the cost of the Middle Class. To me their action appear to tip the playing field considerably in favor of the wealthy at the cost of the "soon to be poor" Middle class.

I could still be wrong, the game is still early! But why would they chose to be " The princes of h*ll, over servants in Heaven". I would think the Fed would prefer being wealthy in a prosperous land over, extremly Rich in a countrywanting to Mob you.
This just doesn''t make sence, but like I say the game is not over.

[mcv57]

In 1798, Vice President Thomas Jefferson wrote that the federal government has no power %u201Cof making paper money or anything else a legal tender,%u201D and he advocated a constitutional amendment to enforce this principle by denying the federal government the power to borrow

[ubrew12]

SharnCedar said: "The bad debt held by Bear Stearns was purchase by the Fed on our behalf, thus spreading the risk and danger from this one small and evil company to the entire country."

Can''t we cut taxes and spread that risk to generations of Americans that haven''t been born yet? (or has that already been done)

BTW, a good book is ''World on Fire'' by Amy Chua. She points out the danger of ''market-dominant minorities'' around the world, and how that inflames nationalistic passion and hate-crimes. The jews in Europe/America, the Chinese in SE Asia, the Lebanese(!) in Africa, these minority groups, through control of money and banking, wield enormous influence (and enormous resentment by the locals) over the countries they are found in. To give but one statistic: 70% of the Philippines is owned by only 3% of the population. And THEY aren''t filipino (they''re ethnic Chinese). Goes a long way toward explaining ethnic unrest all over the world. It also explains much terrorism in a way the MSM would rather we not talk about.

[sharncedar]

Really? It''''s the "Christians" who own and operate the Fed. White Male Anglo-Saxon Protestants, mostly.

Posted by gkc99 at 08:56 AM : Mar 30, 2008

Yeah Greenspan and Bernanke are big Christians, just don''t tell their rabbis. Sure thing, the Fed is all a bunch of Christians, that Goldbaum and Rosenbloom and Kaufman and all those Christian bankers. Yep banking is a big ol'' Christian industry, wink wink.

[sharncedar]

As far as what''s wrong with the financial markets, the Fed just pumped some $600 billion or more (I lose count after a while) into these companies via super-low-interest unsecured loans and other means such as purchases of bad mortgages at face value. If there is no crisis, than those "emergency" actions are the the greatest act of thievery in world history, greater than even the Nazi''s looting of Europe.

BTW, Bear Stearns did not fail or go out of business, it is being acquired by JP Morgan and the traders and executives who caused the alleged problems are getting not only their pay and bonueses but special bonuses for joining JP Morgan. The bad debt held by Bear Stearns was purchase by the Fed on our behalf, thus spreading the risk and danger from this one small and evil company to the entire country. Bear Stearns was not allowed to fail, we are paying for their bad loans.

[mcdonaj3]

It seems to me our financial markets are working quite nicely, thank you. I hear about all of the "abuses" causing the sub-prime market shakeout, but I am still waiting for some specific examples of abuses. The vast majority of Americans are still making their mortgage payments on time and about 95% of the population is employed. Companies who made bad investments (Bear Stearns) are going out of business. This is a good thing. Individuals who bought homes who could not afford them are losing them. These people should be renters. Do you think the government should pay your mortgage when you can''t? I have a fixed rate mortgage at 4.25%. Should the government tell me to pay more because the bank is losing money on my mortgage? There should be consequences for bad decisions. Does anyone believe that you can invest in anything, stocks, bonds, or homes with no risk? People are not a dumb as you think, they are just greedy. Sometimes you have to pay the price for greed.

[jerr11]

Fix the Fed first!

Stop the out of control printing of money to pay for Bush''s extravagant foreign adventures!

Look how far the dollar''s fallen!

Every time you pump that $4 a gallon gas, remember it''s also due to the decline of the dollar!

When the dollar''s worth less, we have to pay more for gas!

Stop the Fed counterfeiting!

They''re stealing money away from us, ordinary Americans!

[ubrew12]

First Bush breaks the CIA (by ignoring it), then says ''Lets fix the CIA!''

Now Bush breaks the Fed (by encouraging Banks to ignore it), then says ''Lets fix the Fed!''

Americans should be deeply suspicious about what Bush means when he says he''s going to fix something.

First Bush breaks Iraq. Then...

[gkc99]

"The Fed is not a government agancy, it is private. It is already leeching $930 Billion a year in interest that our government could keep if they issued the money themselves. Coolidge sold us down the river after Jackson worked so hard to shut these thieves down, and he knew it. (Money Masters on Google Video). This is another move that paves the way for the government to eventually go after hate groups like ''''Christians.'''' "--Posted by gmcnally2



Really? It''s the "Christians" who own and operate the Fed. White Male Anglo-Saxon Protestants, mostly.

How come "Christians" are always blubbering about how oppressed they are when in fact they''re the ones doing the oppressing?

[gmcnally2]

HELLO! The Fed is not a government agancy, it is private. It is already leeching $930 Billion a year in interest that our government could keep if they issued the money themselves. Coolidge sold us down the river after Jackson worked so hard to shut these thieves down, and he knew it. (Money Masters on Google Video). This is another move that paves the way for the government to eventually go after hate groups like ''Christians.''

[joyous88]

the king of saudi arabia owns most of the bear/sterns stock,

you republicons just bailed him out

fools