In the wake of the latest economic crisis, President Obama’s top economic officials today issued five proposals for improving the U.S. financial system that would expand the government’s authority to regulate financial companies and their products.
Timothy Geithner and Lawrence Summers unveiled an outline of their proposals in an opinion piece in the Washington Post. Geithner is secretary of the Treasury. Summers is director of the National Economic Council. They said more details would be revealed in the coming weeks.
Five proposals to fix financial regulations and supervision:
1) Companies should keep more money on-hand : Finance companies must be required to raise more capital and be more liquid, with the biggest firms being supervised by one regulator, the Federal Reserve.
2) Financial products must be watched more closely The administration seeks to require greater transparency for securities, and wants to regulate all derivatives – financial products derived from securities.
3) Consumers and investors should be better protected The government seeks to improve lending practices by offering a stronger “framework” of protection.
4) Expand government’s dismantling authority from just banks to other finance companies The administration seeks greater “resolution” authority, the right to take apart failed financial companies directly, in contrast to roundabout ways as it was done with some companies such as AIG in the latest crisis.
5) Improving global regulation and supervision Improve global regulation and supervision to complement local efforts.