ALL BUSINESS: Risks of Dismantling SEC

Under a Bush administration proposal to restructure the financial system, the power and authority of the Securities and Exchange Commission which oversees investment banks, stock exchanges and publicly traded companies could diminish.

That could hurt all investors. This plan may be proof that the government serves the business lobby's interests rather than those of smaller investors.

"The Treasury Department's blueprint is designed to boost Wall Street's competitiveness, not Main Street investor protection," said Karen Tyler, president of the North American Securities Administrators Association and the securities commissioner of North Dakota.

It's not that the SEC, considered the top cop for the securities industry since it was founded in 1934, is being thrown off the beat. But how the agency would monitor entities under its watch could change under the plan announced Monday by Treasury Secretary Henry Paulson.

The 218-page proposal calls for a sweeping overhaul of how the government regulates thousands of businesses from the nation's biggest banks and investment houses down to the local insurance agent and mortgage broker. Leading the charge will be the Federal Reserve, which will have the power to protect the stability of the entire financial system.

Paulson is spinning the plan as a way to improve and modernize the regulatory system, something needed given the current financial turmoil. But many of the changes aren't necessarily drawn from new ideas; they've been on the administration's to-do list, which has been growing since President Bush took over the White House in January 2001.

In November of that year, then SEC chairman Harvey Pitt spoke of the need "for a fundamental reexamination of our regulatory framework." But as he acknowledged in an interview this week, the flurry of scandals beginning with the implosion of Enron late that year never made a thorough review possible.

So now, as uncertainty plagues the marketplace, some old ideas with a seemingly current timeliness are being trotted out, and among the biggest targets is the SEC.

"This is the last great attempt by this administration to undo SEC regulation," said Lynn Turner, former chief accountant at the SEC in the late 1990s who now is an independent consultant. "They say they want the make the system more efficient, but they really want to dismantle the system."