Senior Obama administration officials on Monday said in a newspaper op-ed piece that a landmark financial regulation reform plan to be released this week will target capital requirements, securitization and other problem areas blamed for the global financial crisis.
In the most complete summary of the plan seen in some time, U.S. Treasury Secretary Timothy Geithner and National Economic Council Chairman Lawrence Summers said the plan would offer a stronger framework for consumer and investor protection.
The piece was published in The Washington Post days ahead of the expected release on Wednesday of a package of administration proposals under discussion for six months now.
One proposal, said Geithner and Summers, will be raising capital and liquidity requirements for all institutions, with more stringent requirements for the largest and most interconnected firms.
In addition, large and interconnected firms whose failure could threaten the stability of the system will be subject to consolidated supervision by the Federal Reserve, and we will establish a council of regulators with broader coordinating responsibility across the financial system.
New reporting requirements will be urged for issuers of asset-backed securities, as well as a rule saying securitizers must retain a financial interest in the performance of the asset-backed securities they issue, they said.
Reduced reliance on credit-rating agencies will also be proposed, said the piece.
Addressing another market implicated in the crisis, the plan will urge oversight of 'over the counter' derivatives, an unspecified harmonizing of futures and securities regulation, and stronger payment and settlement systems.
All derivative contracts will be subject to regulation, all derivatives dealers subject to supervision, and regulators will be empowered to enforce rules against manipulation and abuse, according to the op-ed piece.
It said the proposals will call for a resolution mechanism that allows for the orderly resolution of any financial holding company whose failure might threaten the stability of the financial system.
It also said the United States will lead the effort to improve regulation and supervision around the world.