US Treasury Secretary Henry Paulson is likely to call for the creation of new regulatory agencies with broad powers over lending, the securities industry and business conduct, according to the draft of a study he commissioned. ( Gulf )
The report, which recommends more power for the Federal Reserve, also proposes combining the Office of Comptroller of the Currency - which dates back to the Civil War - and the Office of Thrift Supervision into a single banking overseer. In addition, the draft, which was circulated to government agencies last week, calls for the merging of the Securities and Exchange Commission and the Commodity Futures Trading Commission.
Such changes have been proposed in the past, only to be thwarted in Congress.
"We've had studies like this for the better part of 50 years, and nothing happens because there are a lot of vested interests in the status quo," said Bill Isaac, who was chairman of the Federal Deposit Insurance Corp between 1981 and 1985 and now heads The Secura Group, a financial consulting firm in Vienna, Virginia.
At the same time, the credit crisis and market turmoil of the last half-year have fuelled calls in Congress for an overhaul of the government's financial-regulatory apparatus by lawmakers who say the existing patchwork of regulators has proven inadequate to the task of monitoring a 21st-century financial system.
"With overlapping, multiple regulators supervising the same things, you've got three well-intentioned outfielders running after the same fly ball," said John Dearie, senior vice-president of policy at the Financial Services Forum, a lobby group whose members include Wachovia Corp, Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc.
Paulson, a former chairman of Goldman who spent three decades on Wall Street, commissioned the study in June with the aim of increasing the competitiveness of American capital markets. The secretary, who has scheduled a speech on financial markets for tomorrow, said on March 26 that the Fed ought to have greater sway over Wall Street firms now overseen by the SEC.
Treasury Department spokeswoman Brookly McLaughlin said the draft report "is not current".
The recommendations urge the formation of a "Prudential Financial Regulator" to oversee financial institutions that have an explicit government guarantee such as deposit insurance. The Treasury calls for a "Business Conduct Regulator" to monitor disclosures, business practices, chartering and licensing. It also suggests a "Corporate Finance Regulator" with "responsibilities for general issues related to corporate oversight in public securities markets".