WASHINGTON, June 17, 2009
Obama Grabs Reins Of Financial Regulation
Sweeping Changes Planned As Administration Will Recommend New Government Powers
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(AP)
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Timeline Financial Meltdown Track major events that lead to one of the most tumultuous times in Wall Street's history.
The president was to detail the administration's overhaul plan on Wednesday, recommending new powers for the Federal Reserve; a new consumer protection agency to govern lending and credit; and new rules that would reach into currently unregulated regions of the financial markets.
An 85-page draft of the administration's plan details an effort to change a regulatory regime that Mr. Obama's economic team maintained had become too porous for the innovations and intricacies of the today's financial markets.
The plan the president is proposing, if enacted, would be the biggest changes since the 1930s - changes the president says might have prevented the current financial crisis, reports CBS News senior White House correspondent Bill Plante. Mr. Obama says he knows passing this will be - as he put it - "a heavy lift."
With Congress already embroiled in health care legislation, Mr. Obama has set an ambitious schedule, pushing lawmakers to adopt a new regulatory regime by year's end.
"We are not bulldozing the whole system. We're very much starting with the regulatory structure we have and improving it," Christine Romer, the chair of the White House Counsel of Economic Advisers, said on CBS' The Early Show.
Mr. Obama said Tuesday his administration was going to put forward "a very strong set of regulatory measures that we think can prevent this kind of crisis from happening again."
The financial sector and lawmakers from both parties concede the need for significant changes in the rules that govern the intricate and interconnected world of banking and investment. But the details of Mr. Obama's proposal already are facing resistance, signaling a tough sell for a president who is spending major political capital on his health care overhaul.
Under Mr. Obama's plan, the Fed would gain power to supervise holding companies and large financial institutions considered so big that their failure could undermine the nation's financial system. But even as it gains new powers, the Fed also would lose some banking authority to a new Consumer Financial Protection Agency.
Mr. Obama's proposal would require the Fed, which now can independently use emergency powers to bail out failing banks, to first obtain Treasury approval before extending credit to institutions in "unusual and exigent circumstances."
The expanded Fed role and the new consumer regulator are likely to be the two main political flash points in the administration's proposal. Many bankers oppose a new consumer protection regulator and many lawmakers worry the Fed could become too powerful. Friction over those points could slow any major overhaul.
Besides having the Federal Reserve supervise "systemically significant" institutions, Mr. Obama will recommend a council of regulators, which would include the Fed, to monitor risk throughout the broader financial system. The arrangement is designed to prevent crashes like those that felled AIG and Lehman Brothers.
In conjunction with the Fed's authority over large financial institutions and the new consumer agency, Mr. Obama also will propose:
Mr. Obama's plan does not attempt major consolidation of turf-conscious regulatory agencies and does not inject itself into an ongoing debate over whether to bring some insurance companies under federal oversight.
"We don't want to tilt at windmills," Mr. Obama said on CNBC.
Mr. Obama's decision to create a consumer agency comes amid criticism that mortgage lenders and credit card companies have taken advantage of unwitting customers and saddled them with debt.
The new regulator would have the power to demand that customers have the option of simple financial products, to impose fines and to allow states to pass laws that are stricter than the federal standards. Consumer protections are now spread among various state and federal authorities, including the Fed, the Securities and Exchange Commission, the Federal Trade Commission and banking regulators.
Financial lobbyists rallied against the new agency, saying it's impossible to separate bank regulation from oversight of the products they offer.
"We're supposed to be trying to plug holes and connect dots" with the regulatory overhaul, said Scott Talbott, top lobbyist with the Financial Services Roundtable. "The consumer regulator idea moves in the opposite direction."
Sen. Chuck Schumer, D-N.Y., called the new consumer products agency "the cornerstone of regulatory reform." The Fed and other banking regulators, he said, were too focused on the "safety and soundness" of the institutions they oversee, and "did not do a very good job of protecting consumers."
Rep. Bill Delahunt, a Massachusetts Democrat who has helped write a consumer protection bill in the House, said: "Here we are just beginning to extract ourselves from this mess that was on the cusp of total collapse, and the banks don't want further regulations. Give me a break."
The administration will also have to use its political skills to strengthen the Fed. While Democrats generally agree with a need for regulatory changes, many oppose a Fed with expanded powers.
Sen. Christopher Dodd, chairman of the Senate Banking Committee, has advocated an alternative plan to strip the Fed of its regulatory role entirely and create a new consolidated bank regulator that would assume the roles that the Fed and Federal Deposit Insurance Corp. now play in helping regulate state-chartered banks.
Dodd, however, is a strong proponent of a consumer protection agency and is likely to champion that component of Mr. Obama's plan.
©MMIX, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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- We have reached DEFCON 1?alert?alert!
Analogy: How would you deal with a drunk driver?
A- Hand him a bottle of tequila and send him on his way down the road expecting his condition to improve?
B- Get him out from behind the wheel, off the road and lock him up?
If you chose option A, stop reading and go back to your sitcom/football game and bowl of popcorn.
If you chose option B, read on?
PROBLEM:
The Federal Reserve is above the law and Constitution, making it, no doubt, the most powerful ?corporation? in the world and dangerous to the future of the United States.
Take it from Allan Greenspan, the former Chairman of the Federal Reserve, who recently made an appearance on the PBS NewsHour with Jim Lehrer.
Lehrer asked Greenspan ?What should be the proper relationship between the Chairman of the Fed and a President of the United States??
Greenspan answered: ?Well, first of all, the Federal Reserve is an independent agency, and that means basically, that there is no other agency of the government which can overrule actions that we take. So long as that this is in place and there is no evidence that the administration or the congress or anybody else is requesting that we do things other than what we think is the appropriate thing, then what the relationships are don?t frankly matter.? Translation: The FED is above the law. It can?t be audited and conducts policy in secrecy.
The "Federal Reserve" is a PRIVATE corporation. It is no more "federal" than Federal Express. THE FED CANNOT BE AUDITED = NO OVERSIGHT.
SOLUTION:
The only hope at this point is the Federal Reserve Transparency Act, HR 1207, now up to 232 co-sponsors. It needs a two-thirds vote with 290 members on board. This bill would repeal special audit protections for the Federal Reserve (31 USC 714 ? Sec. 714) and calls for a full Government Accountability Office audit of the central bank to be completed before the end of 2010 and submitted to Congress for review. Contact your congressman/woman and tell them you support the bill. Do this in numbers as massive as possible. Join a group online to inform yourself.
Spend a few minutes online to check out if these statements are true or false. This is the first step to waking up.
Turn off FOX News and CNN?get your news from alternative news sites that base their information on facts that can be verified through documentation, not conjecture and manipulation.
Lastly, if you don?t take any initiative of your own to find out what?s going on, then regretfully, you get what you deserve-take another Prozac, wash it down with a glass of flouridated water, and suck your thumb in the fetal position. Remember: Yes, we can!
By the way, Google this--> ?protests low-level terrorism?. Soon you will not be allowed to voice your dissent publicly. Fact not fiction. Speak up and take action before it?s too late. Thank you for your attention.
Note: This is the second time I have posted this comment today.
Strange how the comments went from 35 this morning to 6 now. - Reply to this comment
- And don't forget,
Any IG who discovers waste or ilegal activity will promptly be fired.
do not pass go, to not collect 200 dollars and do not expect the 30 day notice required by law...
Now that's change we can believe in! - Reply to this comment
- We need to stick to a free market system. If the government takes over then we become a communist society. We must not look at government with a capitol G, Government, but as government, something that we control. So get the heck out of the ECONOMY OBAMA!
http://planotexaspolitics.wordpress.com/ - Reply to this comment
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- Your assertion that we are becoming a communist society by allowing the federal government to enact more "Rules of the Road" for financial institiutions is absurd. The only reason the financial institutions played a large role in driving our economy into the ditch, is because of the lack regulatory policies and the lack of enforcement of regulatory policies.
After the near total collapse of our financial industry, how can YOU still be convinced that these greedy corporations can still be trusted to "Do the Right Thing" on their own without federal regulations and guidelines, when it comes to protecting the interest of our ecomony?
- Your assertion that we are becoming a communist society by allowing the federal government to enact more "Rules of the Road" for financial institiutions is absurd. The only reason the financial institutions played a large role in driving our economy into the ditch, is because of the lack regulatory policies and the lack of enforcement of regulatory policies.
- I'm glad to see that the administration is finally cracking down on banks and financial corporations that have been allowed to run-a-muck for decades. Hopefully, people will start to see that we can't afford to no longer entrust our economy totally in the hands of greedy wall street tycoons and investment bankers. Corporations are solely in business to make money and so are ruthlessly greedy by nature. Without strictly enforced regulatory policies, corporate greed will lead to and has led to consumers and the public being taken advantage of.....
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- Well, people, you voted for change. And now you're gonna get it--in spades. These proposed rules do one thing: put the government in charge. And that's a good thing according to its proponents. After all, the government is perfect. It's Medicare system is top notch, and the Social Security system is completely solvent and enjoys a vote of confidence never enjoyed by the private sector. Government officials have the highest standards of ethics and are perfectly and completely loyal to their spouses.
The president never lies to us, nor do judges take bribes from those involved in cases that come before them. The welfare system is sound as a dollar (heh, I wonder about that myself) and our federal budget is in perfect balance with no pork or waste to speak of. Yeah. Putting the government completely and totally in charge is an excellent idea. I wonder why no one thought of it before.
Now, if you'll excuse me, I need to get out of Wonderland. I'm late for a very important date with the Mad Hatter. - Reply to this comment
- Some critics might see a Fraudian slip here, but the word you're looking for in the headline is "reins"-as in horses, not "reigns" as in king.
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