WASHINGTON, June 17 (Xinhua) -- U.S. President Barack
Obama Wednesday unveiled new "rules of the road" for the nation's outdated
financial system, the most significant regulatory transformation since the Great
Depression in 1930s.
Under the plan, the government will make the Fed a
systemic risk regulator to oversee large institutions whose failure could
threaten the stability of the entire system.
U.S. President Barack Obama meets with
regulators in the Roosevelt Room of the the White House in Washington June
17, 2009. Flanking Obama are Treasury Secretary Tim Geithner (L) and
Chairman of the Federal Reserve Ben Bernanke.(Xinhua/Reuters
Photo) Photo
Gallery>>>
It also will create a council of regulators with
broad coordination responsibility across the financial system. The council will
discuss systemic risks but the Fed will not need its approval to act against
them.
Hedge funds, derivatives and consumer mortgages, all
blamed for the current crisis, will thus be under the supervision by the
government.
And institutions that originate loans would be
required to retain 5 percent of the credit risk when the loans are turned into
securities.
"While this crisis had many causes, it is clear now
that the government could have done more to prevent many of these problems from
growing out of control and threatening the stability of our financial system,"
said the 85-page white paper released by the Obama administration.
In a speech at the White House, President Barack
Obama said the current crisis is due to "a cascade of mistakes and missed
opportunities" which took place over several decades.
"A culture of irresponsibility took root from Wall
Street to Washington to Main Street. And a regulatory regime basically crafted
in the wake of a 20th century economic crisis -- the Great Depression -- was
overwhelmed by the speed, scope, and sophistication of a 21st century global
economy," he said.
"We did not choose how this crisis began. But we do
have a choice in the legacy this crisis leaves behind," said Obama. "So today,
my administration is proposing a sweeping overhaul of the financial regulatory
system, a transformation on a scale not seen since the reforms that followed the
Great Depression."
"It's time for that to change. I am proposing that
the Federal Reserve be granted new authority -- and accountability -- for
regulating bank holding companies and other large firms that pose a risk to the
entire economy in the event of failure," said Obama.
Treasury Secretary Timothy Geithner and Lawrence
Summers, director of the White House's National Economic Council, said in an
opinion piece published Monday in the Washington Post that the Fed would become
a "systemic risk regulator" for "large, interconnected firms whose failure could
threaten the stability of the system."
"All large, interconnected firms whose failure could
threaten the stability of the system will be subject to consolidated supervision
by the Federal Reserve, and we will establish a council of regulators with
broader coordinating responsibility across the financial system," the two
leaders wrote.
There will also be a new regulator to protect
consumers and investors from risks in the financial world.
The new regulator, an independent Consumer Financial
Protection Agency, would have the sweeping authority to impose fines and 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.
NEW YORK, June 17 (Xinhua) -- As the Obama
Administration released its proposal to make the most sweeping changes in bank
regulation in 75 years, Wall Street differed on the effect of the overhaul plan.
"We applaud the Obama Administration's proposal to
overhaul the financial regulatory structure as a critical step toward restoring
trust in capital markets," said Duncan L. Niederauer, chief executive officer of
NYSE Euronext Wednesday. Full story
NEW YORK, June 17 (Xinhua) -- The 10 large U.S. banks
that were approved to repay about 68 billion U.S. dollars of government rescue
fund early are expected to finish their payment on Wednesday.
According to separate statements from the banks,
JPMorgan Chase& Co. repaid 25 billion dollars, and New York-based Morgan
Stanley and Goldman Sachs Group Inc. each gave back 10 billion dollars. U.S.
Bancorp refunded 6.6 billion dollars and BB&T Corp. paid 3.1 billion
dollars. Full story
