Obama Seeks Reforms in Financial Supervision

Posted by thanhlt

April 30, 2010

This is
the VOA Special English Economics Report.

On
Wednesday, President Obama proposed major changes to rebuild government supervision
of the financial industry.

President Barack Obama announces his plan at the White House

President Obama announces his plan at the White House

BARACK
OBAMA: “So today, my administration is proposing a sweeping overhaul of
the financial regulatory system, a transformation on a scale not seen since the
reforms that followed the Great Depression.”

The current
economic downturn grew out of a culture of irresponsible lending and borrowing
and “a failure of the entire system,” he said. He says a new system
is needed to meet the speed and complexity of a twenty-first century global
economy.

Treasury
Secretary Tim Geithner says the financial crisis developed in part because the
existing system let some companies “shop for the weakest regulator.” He discussed
the plan before the Senate Banking Committee on Thursday.

One goal
is to increase supervision of big companies whose failure could threaten the
financial system. The Federal Reserve would gain new powers. The central bank
would work with a proposed Financial Services Oversight Council to decide which
companies are too big to fail.

The idea
is to identify troubled companies early. But the Fed would now have to seek
permission from the Treasury to carry out emergency lending.

The
administration also proposes a new Consumer Financial Protection Agency. It would
be responsible for protecting people from unfair and abusive practices with borrowing
and investing.

The
administration also supports another proposal. Lenders would have to keep five
percent of the home loans they would normally group together to sell as
securities. The idea is that lenders will be more responsible in making loans
if they might not be able to pass off risky mortgages to investors.

Democratic
leaders in Congress say they hope to pass a bill for the president to sign by
the end of the year.

Some
groups were dissatisfied with the proposals. Insurance companies hoping for simplified
rules will continue to deal with different supervisors in every state. And there
is almost no effort to combine the numerous federal regulatory agencies into a
single financial regulator.

An
industry group, the Financial Services Roundtable, says it supports many of the
administration’s proposals — but not for a consumer protection agency. It
opposes separating the regulation of a company from its products, saying each
regulator will only have half the information. The industry “does not
necessarily need more regulation,” it says,” but rather more
effective regulation.”

And
that’s the VOA Special English Economics Report, written by Mario Ritter. I’m Steve Ember.