Whither (Or Wither?) Financial Regulatory Reform?

Among other things, he reminds us of where we were a year ago:

 

“In September alone, Fannie Mae and Freddie Mac were put into government conservatorship. Lehman Brothers collapsed. Merrill Lynch, Wachovia and Washington Mutual were acquired in distress. A $62 billion dollar money market fund ‘broke the buck.’ The world's largest insurer avoided bankruptcy only with the help of $85 billion in emergency aid. Goldman Sachs and Morgan Stanley announced they would protect themselves by becoming bank holding companies. When Congress' first attempt to pass the Emergency Economic Stabilization Act (EESA) failed, the stock market took a historic plunge. 

 

“In a matter of just three months, five trillion dollars of Americans’ household wealth evaporated. Economic activity and trade around the world ground toward a halt.”

 

Geithner then set forth three objectives for reform:

 

-          It must provide substantial new protections for consumers and investors.

 

-          It must create a more stable, safer financial system, one less prone to crisis.

 

-          And it must safeguard American taxpayers from having to bear the costs of battling future crises.

 

How to get there? The Administration proposes to strengthen standards for investment advisors and brokers; expand Securities and Exchange Commission authority over disclosure and enforcement; and have “a dedicated agency to set and enforce clear rules for both banks and non-banks in credit cards, mortgages and savings accounts.” 

 

Among the notable specific proposals are the following:

 

-          Merge the Office of the Comptroller of the Currency and the Office of Thrift Supervision into a new National Bank Supervisor.

 

-          Bring “unregulated firms and markets into the system by requiring registration of hedge funds, and setting clear rules for all derivatives markets.”

 

-          Require “that all financial firms hold higher capital and liquidity buffers.”

 

-          Require that the firms “too big to fail” prepare “plans for how they should be dismantled in case of failure.”