The Obama administration plans to unveil on June 17 its sweeping plan to overhaul financial regulation, according to a source familiar with thinking at the U.S. Treasury Department.
The proposal will serve as a framework for lawmakers as they embark on the thorny task of restructuring how banks, hedge funds, derivatives, and other financial firms and securities are policed.
Treasury Secretary Timothy Geithner will testify on June 18 before the House Financial Services Committee on the proposal, the source said, speaking anonymously because the administration has not formally announced the dates.
A Treasury spokeswoman did not immediately provide a comment.
Administration officials and lawmakers have said they are aiming to have broad legislation passed by the end of the year. The two groups have been meeting over the past few weeks to hash out an outline of the proposal, which will likely put the Federal Reserve in charge of monitoring systemic risk and will give the Federal Deposit Insurance Corp new powers to unwind large, troubled financial institutions.
The exact structure of the plan has been fluid, with Federal Reserve Chairman Ben Bernanke telling a congressional committee on Wednesday that the exact structure of the arrangements, I think, remains to be discussed when asked about the Fed's future role.
A particularly difficult problem is how to rationalize the four bank regulators -- an issue fraught with turf battles both among the agencies and congressional committees.
The Treasury source, and another source familiar with the Treasury's thinking, said the administration will not propose to merge the bank regulation responsibilities into one super bank regulator. Rather, it will likely propose to merge the Office of Thrift Supervision, which mostly regulates mortgage lenders, and the Office of the Comptroller of the Currency (OCC), which regulates many of the nation's largest banks.
The OCC would be the on-site inspector of a broader array of banks, ending on-site visits from the Fed and the FDIC. The Fed as systemic risk regulator, and the FDIC, as guardian of the deposit insurance fund, would have to rely on OCC data.
There's no reason why we need three agencies conducting separate, duplicative on-site exams, the source said.
The Fed could also lose some of its consumer protection responsibilities, which would move to a new agency that would supervise financial products, such as credit cards, mortgage-related products and insurance.
But the Fed could gain supervisory powers over broker dealers (currently a securities regulator function), hedge funds, private equity and derivatives, in the central bank's new capacity as systemic risk regulator.
The new consumer protection entity would not include investor protection - which currently falls under the Securities and Exchange Commission's purview, one of the sources said.
The investor protection and market integrity role would likely be housed in an agency that would be produced from a merger of the SEC and Commodity Futures Trading Commission, sources have said.
The new investor protection agency would oversee all investment products.
An advisory committee would then back up the Fed in monitoring systemic risk across all financial products and institutions. This would be similar to the President's Working Group on Financial Markets, which is chaired by the Treasury secretary and composed of the chairmen of agencies like the SEC, the Fed and the CFTC.
(Reporting by Karey Wutkowski and Rachelle Younglai; Editing by Tim Dobbyn)