Sweeping Fed Plan Sparks Intense Debate

Democrats Charge Treasury Secretary's Suggested Financial Overhaul Does Not Go Far Enough

(CBS/AP)  The Bush administration Monday proposed the most far-ranging overhaul of the financial regulatory system since the stock market crash of 1929 and the ensuing Great Depression.

The plan would change how the government regulates thousands of businesses from the nation's biggest banks and investment houses down to the local insurance agent and mortgage broker.

Treasury Secretary Henry Paulson unveiled the 218-page plan in a speech in Treasury's ornate Cash Room. He declared that a strong financial system was important not just for Wall Street but also for working Americans.

Wall Street historian Charles Geisst told CBS News correspondent Anthony Mason there is widespread agreement that the regulatory system created in the 1930s is an antique.

"Does this proposal address what's happened?" Mason asked.

"It addresses it after the fact," Geisst said. "And I think maybe after the fact is no longer good enough. That's what most people are telling us."

The administration's plan was already drawing criticism from Democrats that it does not go far enough to deal with abuses in mortgage lending and securities trading that were exposed by the current credit crisis.

Presidential candidate Hillary Rodham Clinton on Monday criticized the plan, saying the proposal "comes late and falls short."

The New York senator said the government must move more assertively to contain the mortgage and credit crisis rattling financial markets, especially in finding ways to ease soaring rates of home foreclosures.

"No amount of rearranging the deck chairs can hide the fact that our housing and credit markets are in crisis, and they're sinking deeper every day," Clinton said at a campaign appearance. "Every day we fail to take aggressive action is a day lost."

Massachusetts Secretary of the Commonwealth William F. Galvin blasted Paulson's approach as "a disastrous backward step that would put the investor in jeopardy" because it would pre-empt state regulation of securities and insurance.

The administration said that it planned to work with Congress to have constructive conversations, but officials would not predict when any aspects of the proposal could be enacted into law.

Asked if Mr. Bush's goal was to get the overhaul approved before he leaves office, presidential press secretary Dana Perino told reporters aboard Air Force One, "We'll have to see. It is a big attempt."

The plan, which would require congressional approval for its biggest changes, seeks to trim a hodge-podge collection of overlapping jurisdictions that date back to the Civil War.

It would give the Federal Reserve more power to protect the stability of the entire financial system while merging day-to-day bank supervision into one agency, down from five at present.

It also would create one super agency in charge of business conduct and consumer protection, performing many of the functions of the current Securities and Exchange Commission.

It would propose eliminating the Office of Thrift Supervision and the Commodity Futures Trading Commission, merging their functions into other agencies.

It would ask Congress to establish a federal Mortgage Origination Commission to set recommended minimum licensing standards for mortgage brokers, many of whom now operate outside of federal regulation, and it would also take a first step toward federal regulation of the insurance industry by asking Congress to establish an Office of Insurance Oversight inside the Treasury Department.

Paulson acknowledged in his remarks that most of the changes will not occur until after a lengthy debate in Congress, leaving it to the next administration to deal with the biggest changes proposed by the report. He also said the Bush administration's focus would remain on getting through the current severe credit crisis, which has roiled financial markets since last August.

Paulson rejected Democratic charges that it was lax regulation of mortgage brokers and the financial industry that had led to the current problems.

"I do not believe it is fair or accurate to blame our regulatory structure for the current market turmoil," he said. "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."

Banking groups raised strong objections to the plan while other industry groups had mixed reactions.

"Dismantling the thrift charter and crippling state banking charters will weaken banking in America," said Edward Yingling, president of the American Bankers Association.

In Congress, House Financial Services Committee Chairman Barney Frank, who is working on his own regulatory revamp, called Paulson's proposal a "constructive step forward" but said it wouldn't give the Federal Reserve enough authority to carry out its expanded job to police the stability of the entire financial system.

"We need to be clear what it won't do," CBS News correspondent Anthony Mason told The Early Show. "It could streamline the system, that's what it's about. The markets will like this because as one economist said to me, this is the 'go-easy on Wall Street plan.'"

Mason added, "There's not a lot of new regulation here."

Many Democrats said that Congress' first priority should be to deal with the current mortgage crisis that is threatening millions of Americans with the loss of their homes and that an extensive debate on a regulatory overhaul should not occur until a new president is in office next year.

CBS News correspondent Kimberly 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.

Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said in an appearance on CBS News' The Early Show that it was not a failure of the regulatory scheme but "a failure of leadership" that led to the current crisis.

The proposed overhaul would be the most extensive since the current regulatory system was created in response to the 1929 stock market crash and the Great Depression.

It comes at a time when the financial system faces its most severe credit crisis in two decades, one that has resulted in billions of dollars of losses for big banks and investment houses and the near-collapse of Bear Stearns, the country's fifth-largest investment bank.

The rising tide of bad debt has made it harder for consumers and businesses to get credit, further weighing on an economy struggling with a prolonged housing slump and soaring energy prices. Many economists believe the country is already in a recession.

[excoachken]

Most lame duck Presidents do not initiate "sweeping changes" of any sort in their last 9 months of office holding. Isn''t anybody else a little suspicious of this group of greedy thieves, playing games with an institution that "intelligent" leaders have declined to tamper with in the past.

[skyk-2009]

I do wish these people would just leave things be until we can get a real leader in there. EVERYTHING they touch turns to krap.

[omega39-2009]

In the late 90''s Clinton and his Republican cronies did away with The Banking Act of 1935. This act kept Commercial and Investment banks separate. When it was repealed in 1999 the financial services industry was born, and here we are less than 10 years later.

[Gary Kempf]

excoachKen;

[Gary Kempf]

excoachKen;
I am suspicious of anything this administration does, If they are doing anything, its because they are covering somebody a**.

[sumarongi]

I''d feel a lot better they went outside of the government to non-profit financial services and educational institutions for advise and oversight before making any changes. I mistrust any of our current administration to make any changes. They are the ones who allowed the problem to escalate to it''s present level in the first place.

Having Bushit involved at any level raises my hackles.
This sounds like slamming the corral gate after the livestock have all fled. What I''d like to see is a broad sweep of existing financial instutions and corporations with arrests and harsh sentences handed out to send a message that we are tired of the BS policies. Let them do jail time instead of living the high life off of the money they earned for failing at their jobs. Gee you lost billions of dollars while drawing six and seven figure salaries and million dollars worth of stock options and bonuses. We need to send a no holds barred message that this is not the way to do business in America.
Take the jerks off of their estates and yachts and throw them in the slammer.

[king77shaw]

AMERICA .. DECLARE YOUR OWN SWEEPING FED PLAN ! DENY THE ELITES THE POWER TO CONTROL YOU !!

1) CANCEL YOUR CABLE / SATTELITE TV: let the corporate media moguls (and their advertisers) know that you will no longer pay for their propaganda.

2) STOP INVESTING YOUR MONEY ON WALL ("WAR") STREET: corporate America is selling out the middle class to the lowest global bidder and using our own money to do it; the financial markets will push for anything that increases profits - especially war .. invest your money in land, real estate, GOLD and SILVER.

3) SUPPORT & DEVELOP LOCAL ECONOMIES !
- Buy from local manufacturers, local retailers, local craftspeople/artisans, etc.
- if possible, BURN WOOD for heat;
- support local ORGANIC growers or grow some of your own food;
- implement alternative energy sources (solar, hybrid autos etc ..)
- develop local means of commerce not based on the failing US dollar.

4) AFFORDABLE HEALTH CARE BEGINS WITH YOU - healthy eating habits and exercise will create less demand on the system meaning lower costs. You%u2019ll have plenty of time to work out once you UNPLUG THE TV DRUG.

5) STOP UNNECESSARY CONSUMPTION & STOP USING YOUR CREDIT CARD !

6) DECENTRALIZE ! - the global economy is nothing more than a ploy to centralize power, control and wealth into the hands of an elite few - blinded by misinformation, the American people are buying right into it - the rich get richer and the middle class is quickly becoming the working poor.

[oscarez]

Is this Bush''s way of gutting the system that protects the little guy? Hay, mom and pop day traders beware. Just like Bush using 911 as a reason to invade Iraq, Bush is using the severe credit crisis to takeover the banks and print more money.

[joyous88]

sweeping bailout for the wall street wealthy

flip flop borrow and spend republiCons

and not one dime for a disabled veteran

conservatives are immoral godless anti americans

[sistatee-2009]

Last week the administration ''found'' 30 billion to help one Wall Street company? What, they opened a drawer, and...SHAZAN...there was three thousand million dollars in cash they''d overlooked? No, the Fed simply printed up thirty truckloads of paper and dumped it into the market, further inflating the worthless dollar. As a result the cost of everything will go up again, exactly the opposite of what is needed in the economy.

[joyous88]

king77shaw

right on, well put,

I vote for a day of national strike,

how about april 15th , no one spend a dime,

these clowns can''t spend a dime for a disabled veteran

lets not spend a dime for their corrupt system of 15 april

[oscarez]

Don''t count on the FDIC to protect your savings. The FED has already paid out more to Bear Stearns then was in the FDIC account.

[omega39-2009]

Bush and the GOP are going to outsource what should be government regulation. The financial industry applauds the move. The federal reserve will stand idly by, as it did in the two previous bubbles, and step in to help protect the CEOs and Fund Managers while preaching personal responsibility to those that have lost their home and retirement.

[omega39-2009]

"I do not believe it is fair or accurate to blame our regulatory structure for the current turmoil," Paulson said in a draft of remarks he was to deliver Monday.

Considering the safeguards worked wonderfully from when they were enacted in the 1930s until they were repealed starting in the late 70s, one has to wonder what regulatory structure he is talking about.

[king77shaw]

Posted by joyous88 - day strikes and day boycotts are nice in theory but accomplish little - people need to change their lifestyles and free themselves from their corporate addictions .. how you spend your money and what you choose to consume is far more important than who you vote for -- it will not matter who the president is, they are all essentially the same -- stop supporting their corporate keepers and you will see real change ..

[citizenusa-2009]

"The Enemy from Within". Bush and his Administration have high jacked our country and forced us into moral and financial disaster. Their "fix it" schemes will put the final nail in our coffins. Osama''s efforts to derail our country paled in comparison to what George W. Bush has "accomplished" during his reign. God can only help us now, because we''ve failed to stop the madness.

[demslie]

AMERICA .. DECLARE YOUR OWN SWEEPING FED PLAN ! DENY THE ELITES THE POWER TO CONTROL YOU !!

3) SUPPORT & DEVELOP LOCAL ECONOMIES

4) AFFORDABLE HEALTH CARE BEGINS WITH YOU

5) STOP UNNECESSARY CONSUMPTION & STOP USING YOUR CREDIT CARD !

6) DECENTRALIZE

Posted by King77shaw

We have seen this before. It''s called the Communist Manifesto. It was written by Lenin and Marx. Good choices for Democrats.

[antoniof123]

Why is it when ever the neo con party (former Republicans) get in control the government explodes and grows by leaps and bounds.

I guess they are all talk and nothing more.

[johngoodnews]

Does it really matter at this stage whether the actions of this Administration with regard to the financial sector are designed to do anything other than aid the financial sector? And, for those who are waiting for ''08 in order to see light at the end of the tunnel, it isn''t going to happen---the Democrats will lose what seats they''ve gained in both the House and the Senate, and there will be a Republican President. Why? Because the Democratic Party is controlled by cocktail party liberals whose personal financial interests are better served by Republicans, but whose coctail parties are better served by showing they are politically correct--race, feminism, environment, etc., etc.. So, they get the best of both worlds: they get to fly the green flag and have politically cool nominees, (except for Edwards, he was a dangerous person; almost a pure social democrat), but their money is securely in the hands of Republican pragmatists. Gotta luv them cocktail party liberals.

[antoniof123]

Posted by johngoodnews at 10:44 AM : Mar 31, 2008

Hey in case you haven''t heard the Republicans are saying that if they only lose 4 Senate seats it will be a win for them. Hate to break the news to you but in reality they are worried that even the red states will fall. Remember KY and the Democratic governor, also the state is changing to Democrats. So it looks like the number could go over 60 seats in the Senate. Hey guess what that stops the Repulbican neo con party dead in its track.

We know that you talk big but you must be getting really scared right about now. Remember 80 percent of America wanted SCHIP, 75 percent wants out of Iraq in less than 2 years, the economy is in shambles with the Republicans having lead us there. Be afraid be very afarid neo cons.

[demslie]

It''s amazing that any program by this administration will be immediately attacked by Democrats who have paralized the Congress with endless investigations of Republicans. Not one piece of legislation has come from this "Do Nothing" Democrat Congress.

[mike71067]

The Dumbocrats are angry that it wasn''t their idea. Nothing the administration could do will ever be enough for those clowns. Heck, Bush could make gay pride parades mandatory, and permit public sodomy between consentimg males on Sundays, and the Dumbocrats would still find a reason to complain.

[king77shaw]

Posted by demslie - We have seen this before. It''''s called the Communist Manifesto. It was written by Lenin and Marx. Good choices for Democrats.

.... hmmm - I never thought personal freedom would be confused with communism --

[nathan8804-2009]

This is a disaster in the making. On the backs of the middle class will banks and stupid Americans be saved from their poor decisions. However, the bulk of this blame should be placed on stupid people that had no business buying a home they could not afford or signing paperwork they did not understand. These stupid Americans have no one to blame but themselves. They rather spend their time watching sports games and drinking beer rather than taking a class on home buying. Banks would never have gotten away with this type of lending had people taken the time to read! For all you people blaming Bush for the current problems look into the mirror you should see the problem. Bush is the greatest Democrat alive. In eight years he inflated government spending, mushroomed government agencies, and created new wars. Yes, Democrats are the greatest warmongers in history of America Wilson, Roosevelt, Kennedy, Johnson, now Bush. He is no Republican!

[stn_sage]

NO! NO! NO! NO! NO! NO! NO!
This administration hasn''t gotten ONE thing correct in 7 1/2 YEARS! What these 11th hour changes are about is to confound, confuse, and cripple the national monetary management apparatus beyond repair!
THEN, they can blame the Democratic Congress and president---if elected---in an attempt to try to regain control of Congress in 2010 & 2012!

The Democratic Congress better start showing some ''guts'' and stand up to these crooks while we still have a stabile country! OR, the public WILL start voting them out in 2010! Times are changing, people are going to start voting their incumbents out who aren''t doing their jobs!

[donbl1]

Not a bad plan.

The real danger with any government action is the "law of unexpected consequences".

Often, government action is bad for the US economy. Doesn''t make any difference which party implements it.

This plan seems a step in the right direction.

It is not a solution for the current homeowners but that will come under separate legislation.

[king77shaw]

America needs to start thinking outside of the Republican vs Democrat paradigm it''s blogged itself into .. they are in essence, the same and increasingly irrelevant to the problems that face real Americans -- corporate America funds the candidates they want to run and in return the candidates give corporate America what they want at the expense of "we the people" -- guess who will be paying for the financial bailout ? the "free" market ? no, middle America --- stop supporting the Elite - toss their useless addictions over the side of the boat and have your own "tea party" -- take control of your life and support your neighbor not an investment bank exploiting some "communist" laborer in China ..

[jerr11]

All they need to do is impeach Bush and Cheney.

This entire economic fiasco is entirely due to their greedy wars.

To pay for those wars they borrowed money and PRINTED MONEY!

And now after 7 years of their looting, the dollar''s only worth 60 percent of what it used to be.

Your hard earned dollar''s only worth 60 cents now!

That''s the reason gas is at $4 a gallon.

The treasury has been looted by the Bush/Cheney rogue admin!

IMPEACH THEM NOW!

[piercetheval]

THE GATES OF ROME HAVE FALLEN, WE ARE OVER RUN, AND THE VANDALS ARE SACKING EVERYTHING!

[leftyintexas]

Be VERY leery of ANYTHING this DOOFUS administration wants to do. It ALWAYS turns out hurting America in the end. Their dismal record is proof enough!

[daniel.harris6]

"You''''re an idiot demslie...

What he''''s calling for is decentralization, i.e., smaller federal government. Ever heard of that before? Let me give you a hint, "It''''s what every Republican since Eisenhower has called for," and which every last one has violated. Idiot!" - Posted by Nancy_Naive

Actually, demslie wasnt too far off. King77shaw is essentially describing the socialist ideal: local communities that support themselves with an exchange of services and goods not based on a monetary system. However, this has never worked for a modern society. What ultimately results is the following. If commune A wants a super cool product that only commune B produces, they have to exchange a service or product for it. In practice this is not efficient without a means of facilitating transactions (i.e. money) So one then needs to develop a monetary system that is backed by a centralized source to facilitate all these transactions. Then the communes figure out they are defenseless by themselves, so they band together and use a portion of their transactions to fund a means of defense (tax for a military), then a portion for infrastructure to easy transporatation, etc., etc. and quess what? Youre back to where you started. I will agree that the centralized body that organizes all this stuff (government)should play as minimal a role as possible though.

[georgew1956]

they want to give us money to forget there wrong doings but we will not forget the last 8 years of the worst presidentsey ever. and i just don''t think he gets it. SAD, THE PUBS ARE SHOWING THEIR HAND AND WE Caught ON. NO MORE PUBS.

[stn_sage]

King77shaw - I agree that the public needs to start thinking---and voting---outside the D/R paradigm. And yes, because corporate America has its'' claws into both to varying degrees. But, the middle class won''t be paying for anything---I trust you''ve noticed---it has diminished under 7 1/2 years of this administrations'' stupidity! We''re rapidly becoming a two class system---wealthy and poor! We need to quickly get a responsible govt seated, correct Bush/GOP blunders, and move forward while we can!
Before, world events or natural disasters or whatever occurs, forces decisions, and prevents recovery!

[king77shaw]

commenter1 - you make some good points and indeed things are cyclical but I''m not suggesting we follow the commune model - however we now have a system of federal government that is ineffectual, unsustainable and incapable of dealing with the most important of issues .. best to be done at a more localized level, possibly stronger state or county institutions that are more accountable to the people they serve not the corporation that exploits them ..

[stn_sage]

Most lame duck Presidents do not initiate "sweeping changes" of any sort in their last 9 months of office holding. Isn''''t anybody else a little suspicious of this group of greedy thieves, playing games with an institution that "intelligent" leaders have declined to tamper with in the past.
posted by exCoachKen at 08:54 AM : Mar 31, 2008

My response:
Well, I guess there''s you and me! :) Everybody else seems to have a short memory span!

[daniel.harris6]

king77shaw,

I agree there, and I see now that you were making a point and not advocating taking your suggestions to the extreme.

[jerr11]

Bush/Cheney gave tax cuts to the wealthy, and to the rest of us, they stole our money!

How? They PRINTED MONEY to finance their wars of greed.

Every dollar you earn now is worth only 60 cents of the preBush dollar.

If you don''t believe me, take a trip to Canada, or buy some gas today!

[sumarongi]

If they really wanted to do something that would not only help those most in danger from the economic debacle they would raise minimum wage to a living wage level. In Florida, at 271.00 a week, a single person, little less a family, cannot afford to live on a 40 hour week.

An increase in minimum wage would stimulate local economies nationwide. The increased spending power would flow into corner markets and other businesses every week as opposed to Bushit''s one time check plan.
It would also give the workers the opportunity to save a portion of their income, thus lessening the huge late fees that detiorate their income as they fall further and further behind because they are constantly robbing one bill to pay another.

But business says no, it will decrease our bottom line. I say it would increase it because more spendable income would be flowing into local economies. The businesses complain because they are in favor of the current policy economic slavery. Over 2 million Americans have no health care or chance of it, no benefits, they can''t even afford to chip in on them. They can''t take a sick day, or spend time raising/supervising their children. Thus stimulating juvenile delinquency, crime and gang activities.

Wake up America and do the math. Ask if you could live at this wage level? We need to address this matter now.

[forthepeopl1]

His comments came as the president paid a quick visit to a nonprofit debt counseling center in Freehold, N.J. to refute exactly that sort of criticism and argue his administration has acted effectively.

The administratio''s moves over the past about six months include expanding the Federal Housing Administration''''s ability to offer refinancing to homeowners with good credit, allowing Fannie Mae and Freddie Mac to buy up more home loans, and brokering help for struggling homeowners through a private-sector mortgage industry group. That group has agreed to offer a five-year rate freeze for people who have not missed payments or a 30-day foreclosure pause for those who fall behind.


"There are some homeowners who have made responsible buying decisions and who could keep their homes with just a little help," he said. SO WHY DID YOU BAIL OUT YOUR FREINDS ON WALL STREET. MR PIN HEAD

The president has come out strongly against the Democrats'', warning that an overzealous governmental response to the nation''s housing woes could hurt the economy''s ability to recover long-term."We have a role to play at the government level, and that is to help lenders avoid foreclosure," he said. THE STOCK MARLET IS MORE IMPORTANT THEN A FEW MILLION AMERICANS LOSING THEIR HOMES.. "The housing market problems are complicated and theres no easy solutions.

DONT FORGET MR POTATO HEAD/ PAULSON I S FROM WALL STREET

DONT FORGET BEN/MR FED IS FROM WALL STREET TOO

[pensacola88]

I don''t know how many of us remembered the S&L crisis of the late ''80s where taxpayers got stuck for the tab to bail out the banks which defaulted.

This latest crisis seems to echo the same theme again.

I personally recall applying for a mortgage within the past 2 years and received offers to borrow amounts I know I wasn''t qualified to repay. The lenders even told me I didn''t have to prove my income, because they would accept my declaration of income as "Stated" meaning that I didn''t have to prove it with W-2''s or 1099''s. I saw through this and found another lender.

My biggest difference with the ethics of this is knowing that some CEO''s still received their lavish compensation packages even when their paper profits were withering away as the list of defaulting borrowers were climbing to alarming proportions.

[lorinkundert]

Complete control of the finance and banking system, sounds a lot like what the Socialists do when they gain power, do you want the Government getting involved with your finances?

[jumkey]

Really commenter1? I wasn''t aware the our mortgage and banking industry was based on a socialist model.

[demslie]

Complete control of the finance and banking system, sounds a lot like what the Socialists do when they gain power, do you want the Government getting involved with your finances?

Posted by lorinkundert at 12:00 PM : Mar 31, 2008


Talk to Bush and the Republicans. Its their plan.
Posted by FloydZepp

Typical Democrats. Democrats Bittch because they want more government oversight. But when Bush proposes more oversight, Democrats scream too much oversight. The Democrat Congress has no plan for running the government except for endless investigations of Republicans. Hillary proposed Government Oversight equal to a Communist Take-Over and not a Democrat Alive complained. Its about Democrat hate for Republicans and thats all we have gotten since they were elected.

[blackwater66-2009]

Keep the Government out of our financial markets ! What is this Venezuela ?

Time for vote em all out !! We need change from old to new, someone with new idea''s and can think out of the box. Who would that person be ? Keep special interest out of the whitehouse !!

I am an independent voter !!

[actornaught]

I can still see that puppet reagan rubbing his hands together and saying "We just hit the jackpot!", after putting the pen down from signing the bill to deregulate Savings & Loans.

We know how that neocon tragedy played out...

[oscarez]

demslie - and your point is?

[kaviz]

Does anybody know if Bear Stearn was one of the institutions that Bush had plans to manage our social security?

[kissamaarse]

Giving the Federal Reserve -- non-government bankers -- yet more control of America drives us further into a fascist state. There was a day when America controlled its own monetary system, not the Big Banks.

[staythecurse]

The fox has been seen.
The fox knows he has been seen.
The fox is now clucking like the chickens he is guarding.

[nolalou]

Rather you blame the practices of the lending institutions, or the people who took out loans they couldn''t afford, doing nothing is not an option. If banks fail, or 10''s of thousands of homes get repossessed, that will further damage an already hurting economy.

Just one more thing the Bush administration has shown it doesn''t understand is the economy. Now we have McCain, who knows even less, and admitted so in an interview last year, when he said "The issue of economics is something that I''ve really never understood as well as I should. I understand the basics, the fundamentals, the vision, all that kind of stuff,'''' he said. "But I would like to have someone I''m close to that really is a good strong economist. As long as Alan Greenspan is around I would certainly use him for advice and counsel."