The President Barack Obama tomorrow will present the new financial regulation framework to prevent the outbreak of new crises and to strengthen the protection of investors. The objective of the financial services reform project, through the adoption of a new legislative system with the approval of Congress, is to correct the weaknesses and gaps in the current regulation system also strengthening prudential obligations of financial institutions. But, despite the lobbying of democratic New York Senator, Charles Schumer, for the creation of a new single banking regulator, the Treasury is moving toward a reallocation of the powers of the four existing agencies (Federal Reserve, OCC, OTS and FDIC) without excluding a merger between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
"It is important to react very quickly in terms of financial regulation while remembrance of the crisis is still high," said yesterday the Secretary of the Treasury, Timothy Geithner, crossing to New York. "It is true that we want a positive innovation system, but we have not achieved a satisfactory balance between risk taking and rules in recent years," found in insisting on the need to fill the gaps in the system in terms of prevention and consumer protection. In addition to the reorganization of the powers of the various agencies, the new system, which will be presented tomorrow by Barack Obama, aims to strengthen the obligations of the financial institutions supervisory ratios and liquidity, with a particular requirement level for those that represent a systemic risk.
Fusion SEC-CFTC
"All companies larger, interconnected, whose failure could threaten the stability of the system, will be subject to the supervision of the Federal Reserve, and we will establish a Council of regulators with a responsibility for coordination broadened across the financial sector," said Timothy Geithner and White House Economic Advisor, Lawrence Summers, in a cosigné text published by the "Washington Post".
"The objective is to create a regulatory regime more stable that is flexible and effective, able to guarantee financial innovation while protecting the system against its own excesses," they added. In clear, opting for the solution of the "Council of regulators" and the strengthening of the powers of the Fed, the Obama administration appears to have given up the idea of a single supervisor. "I do not think it necessary and desirable to concentrate the authority on the prevention of future risks in one part of our regulatory system complex," said Tim Geithner to the Senate a few days ago.
In a letter to the Secretary of the Treasury, the New York Senator, Charles Schumer, near Wall Street, however urged it to not give up "aggressive" reform by calling the creation of a single banking regulator of the powers of the four existing agencies of its wishes. Despite the reluctance of the Secretary of the Treasury, the new regulatory framework should however lead to the merger of the SEC and the CFTC's oversight of derivatives, as it has openly called for the CEO of Nyse Euronext, Duncan Niederauer. Finally, the consumer protection mission which was hitherto divided between the various bodies should now be entrusted primarily to the SEC.
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