Obama Administration's New Financial Regulations To Include....

MSNBC----

In conjunction with the Fed’s authority over large financial institutions and the new consumer agency, President Obama also will propose:

-Additional protections for investors, including greater disclosure by hedge funds; regulation of credit default swaps and over-the-counter derivatives that previously operated outside of government oversight; and new conditions on brokers and originators of asset-backed securities.

-A system for the orderly disposition of any troubled, interconnected firm whose failure poses a risk to the entire financial system, together with rules that insist that financial institutions hold more capital to avoid over-leveraging.

Obama’s plan does not attempt major consolidation of turf-conscious regulatory agencies and does not inject itself into an ongoing debate over whether to bring some insurance companies under federal oversight.

“We don’t want to tilt at windmills,” Obama said on CNBC.

Obama’s decision to create a consumer agency comes amid criticism that mortgage lenders and credit card companies have taken advantage of unwitting customers and saddled them with debt.

The new regulator would have the power to demand that customers have the option of simple financial products, to impose fines and to 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.

Financial lobbyists rallied against the new agency, saying it’s impossible to separate bank regulation from oversight of the products they offer.

“We’re supposed to be trying to plug holes and connect dots” with the regulatory overhaul, said Scott Talbott, top lobbyist with the Financial Services Roundtable. “The consumer regulator idea moves in the opposite direction.”

Sen. Chuck Schumer, D-N.Y., called the new consumer products agency “the cornerstone of regulatory reform.” The Fed and other banking regulators, he said, were too focused on the “safety and soundness” of the institutions they oversee, and “did not do a very good job of protecting consumers.”

Rep. Bill Delahunt, a Massachusetts Democrat who has helped write a consumer protection bill in the House, said: “Here we are just beginning to extract ourselves from this mess that was on the cusp of total collapse, and the banks don’t want further regulations. Give me a break.”

The administration will also have to use its political skills to strengthen the Fed. While Democrats generally agree with a need for regulatory changes, many oppose a Fed with expanded powers.

Democratic Sen. Christopher Dodd of Connecticut, chairman of the Senate Banking, Housing and Urban Affairs Committee, has advocated an alternative plan to strip the Fed of its regulatory role entirely and create a new consolidated bank regulator that would assume the roles that the Fed and Federal Deposit Insurance Corp. now play in helping regulate state-chartered banks.

Dodd, however, is a strong proponent of a consumer protection agency and is likely to champion that component of Obama’s plan.

Sources: MSNBC, Bitter Queen, Wikipedia