President Barack Obama will lay out on Wednesday his vision for reshaping U.S. financial regulation, aiming to tighten oversight of the largest firms whose excessive risk-taking triggered a global recession.
The proposals will include closing one bank regulator and creating new overseers for big-picture economic risk and consumer financial product safety, according to a document detailing the administration's proposal.
In a package of reforms that takes on many tough jobs while avoiding at least one, the administration proposes putting the Federal Reserve in charge of monitoring the largest financial firms in the hope that holding one agency accountable will prevent a repeat of the severe banking and capital markets crisis that has shaken economies around the world.
We must act now to restore confidence in the integrity of our financial system, the administration said in the 85-page document.
The lasting economic damage to ordinary families and businesses is a constant reminder of the urgent need to act to reform our financial regulatory system and put our economy on a track to a sustainable recovery.
Months of debate in the U.S. Congress lie ahead. Committees of both the Senate and the House of Representatives have scheduled more than a dozen hearings on regulatory reform between now and mid-July. Conservative House Republicans have already offered their own rival plan.
Obama will present his proposals at 12:50 p.m..
Obama and his top economic advisers see the current financial upheaval as the latest in a series of crises going back decades, so their regulatory reform intends to correct problems beyond just those blamed for the latest episode.
CLOSING THRIFT OFFICE, EMPOWERING FED
Treasury Secretary Timothy Geithner, members of Congress, regulators and representatives from the financial industry and consumer groups will join Obama at the event to lay out a comprehensive regulatory reform plan to modernize and protect the integrity of our financial system, the White House said.
The Obama plan will call for closing the Office of Thrift Supervision, a Treasury Department unit, and eliminating the federal charter under which savings and loans operate, with the objective of streamlining bank supervision.
In addition, the Federal Reserve would be assigned new duties to monitor risks that could threaten the entire financial system, working in conjunction with a council of other regulators to be chaired by Treasury.
The goal is to make sure a failure of one large company -- like bailed-out mega-insurer American International Group, for instance -- does not destabilize the broader economy.
The administration has been discussing for six months how best to tighten bank and market regulation in response to the crisis, with the European Union moving on a similar track and more quickly than the United States in some areas.
As the Obama plan has evolved, the administration has backed away from some proposals as politically unachievable, such as a thorough structural revamp of financial oversight. No merger of the Securities and Exchange Commission and Commodity Futures Trading Commission will be proposed, for example.
Obama will call for establishment of an independent consumer financial products watchdog agency, and for requiring financial firms to hold more capital so they can better survive tough times.
More transparency and accountability would be mandated for exotic financial markets, which in recent years expanded far beyond the government's ability to keep track of them.
Under the plan, the government would be empowered to seize and unwind large, troubled companies that are not banks, modeling the process on the Federal Deposit Insurance Corp's existing power to unwind failing banks.
The administration also will urge reining in markets for securitized debt and over-the-counter derivatives, as well as more regulation of money market mutual funds, credit rating agencies and hedge funds.
It will push for changes in corporate governance that could give shareholders more power to restrain executive compensation.
We are going to put forward a very strong set of regulatory measures. ... We expect that Congress will work swiftly to get these laws in place, Obama said on Tuesday.
In remarks to reporters, he warned that enacting his plan will be a heavy lift politically, with special interests already offering opposition.
The U.S. Chamber of Commerce, the nation's largest business lobbying group, on Tuesday said it opposes key parts of the plan.
House Democratic leader Steny Hoyer said on Tuesday the House will deal with financial regulation reform in late July or soon after Congress' August recess. The outlook in the Senate, which moves more slowly, was unclear.
(Additional reporting by Corbett Daly, Karey Wutkowski, Patrick Rucker, Thomas Ferraro, Rachelle Younglai and Emily Kaiser; Editing by Neil Stempleman)