Summary of Obama Regulatory Changes

[SpartanDem]

I thought this was a great article it lays all the new changes in way that doesn't make your eyes glaze over.


WASHINGTON — President Barack Obama's proposed overhaul of financial regulations aims to eliminate a number of the loopholes that contributed to the recession. Here's a summary of what went wrong and how his proposals would try to fix it:

- Nobody looking out for the little guy. At least five federal regulators had some responsibility for protecting consumers from fraud and predatory lending involving credit cards, payday loans, mortgages and other credit products. Yet this responsibility was the primary focus of none. Obama's plan would strip the Federal Reserve, Federal Trade Commission and other regulators of certain powers and give them to a newly created Consumer Financial Protection Agency. It would be independent and would have the power to make and enforce consumer-protection rules. States could pass rules even tougher than those of the new agency.

_ No regulator looking at the entire financial system. Individual regulators saw parts of the problem, but nobody saw how together they posed a systemic threat. The Federal Reserve would be charged with guarding against threats to the broad financial system. It would have until Oct. 1 to propose what new powers or changes in law it would need to do this.

_ Insufficient regulatory tools. When investment bank Lehman Brothers went bust last September, regulators lacked the authority to seize it as they would a commercial bank. Its demise triggered a near-collapse of the global financial order. Obama's plan would allow regulators to take over and dissolve a large, globally interconnected financial institution if it posed a threat to the financial system.

_ Many voices, no consensus. Although at least seven federal regulators tried to halt the global financial slide, they spoke with different voices. Obama's plan would create a Financial Services Oversight Council — a panel of regulators led by the Treasury Department — to identify risks to the financial system and advise the Federal Reserve.

_ Outsized risks. Because no one was looking at the whole picture, regulators were unaware of how much risk had accumulated in the financial system. The Treasury Department will lead an effort to create new capital requirements for all financial institutions, not just banks, and must issue a report with proposed changes by Dec. 31. The Treasury is expected to require financial firms to save money in good times to have adequate reserves in bad times.

_ Shopping for the least regulation. Regulation of financial institutions was spread among several agencies whose enforcement can best be described as spotty. The most egregious example was insurer American International Group, which branched into financial products through a thrift that the Office of Thrift Supervision insufficiently regulated. That agency would disappear under Obama's plan, which would roll several federal regulators into a new National Bank Supervisor. It would govern all federally chartered lenders, whether they're banks or savings and loans.

http://www.mcclatchydc.com/227/story/70245.html

[babylonsister]

1. The title is good, too: How Obama's regulation plan aims to fix what went wrong

Thanks.

[liberalpragmatist]

2. The best part is the Financial Products Safety Commission

Which seems like a genuinely good idea.

The other bits are OK, but they don't go far enough, I fear. I'm no economist, but I'd like to see something to prevent the formation of institutions that are too big to fail. We need a world of smaller, more regulated banks.

I'm not expert, so it's difficult to foresee what's good and what's bad about it. Lots of people are criticizing this in the press, but many of them are criticizing it from the right, and Krugman has been surprisingly positive on it.

Still, I worry that this is already relatively modest when it comes to regulation and that it's going to get watered-down some more by Congress.

[MarjorieG]

3. Once again, Congress spoke with turf wars, but what we got potentially very positive.

[SpartanDem]

4. Yeah more focus on anti trust laws

is something that I would've liked to have seen in this, but overvall it's a very good package