President Obama today outlined his plan for reform of the regulation of the U.S. financial system. The plan would change how banks and other financial institutions are regulated and create a new consumer protection agency.
The plan merges the Office of Thrift Supervision (OTS) into the Office of the Controller of the Currency (OCC). Many see the OTS as a relatively soft supervisor, noting it oversaw AIG, IndyMac, and Washington Mutual.
Obama's plan would create a council of regulators to monitor system-wide risk with the Treasury Secretary being the chair and working with the Fed.
The plan would create a new consumer protection agency, focusing on protecting consumers from deceptive or financially dangerous mortgages and credit cards. The new agency would have power to issue new regulations.
The Fed would be given new powers, including the ability to require financial firms that are not banks to keep reserves set aside.
On the issue of financial derivatives, the Administration's plan would require firms creating certain securities, including derivatives, to retain 5 percent of the securitized exposure so that the firms have incentives to create securities that perform well.
Also, the FDIC would gain more power to take over deeply troubled financial companies that are not banks and then be able to unwind them. -- R. Mark Rogers