No idea on validity and such...just popped up.
OBAMA PLAN TO CALL FOR SUPERVISION OF GLOBAL FINANCIAL FIRMS THR 16 Jun 2009 23:02:06 GMT
OBAMA PLAN TO CALL FOR SUPERVISION OF GLOBAL FINANCIAL FIRMS THROUGH SUPERVISORY COLLEGES––OFFICIAL
Is he making his move? Or, is this bs.... No idea. Keep an eye out folks.
Don't know about that but this is in the making.
WASHINGTON (MarketWatch) –– President Barack Obama will propose Wednesday to make the Federal Reserve into a consolidated supervisor of large, systemically vital financial institutions and require higher capital standards and more scrutiny of banks' activities because of the risk to the system if they collapse, according to a senior administration official Tuesday.
Obama is slated to outline the details of his proposal midday Wednesday. The plan will then be considered by lawmakers, who are expected to draft legislation reforming the bank regulatory system by the end of the year.
The proposal will also call for the elimination of the Office of Thrift Supervision and the Federal Thrift Charter, subsuming the agency into a new "National Bank Supervisor," agency based on the Office of Comptroller of the Currency that will supervise all federally chartered depository institutions.
The large, systemically significant financial institutions will be regulated by the Fed as Tier 1 financial holding companies, although the proposal also calls for all financial institutions to raise more capital.
The official did not provide details about which banks would be considered "systemically important," with the decision likely to be left to legislators on Capitol Hill.
The official also said the proposal will call for the creation of a financial services oversight council, which will be chaired by the Treasury Department and made up of bank agencies.
The council will seek to fill gaps in supervision, coordinate data collection and work with bank regulators so that the Fed is aware of any emerging risks. The proposal seeks to set up new firewalls between banks and their affiliate divisions, he said.
The Obama administration will also seek to have hedge-fund managers register with the Securities and Exchange Commission, so agency officials can examine their books. Many hedge-fund managers already voluntarily register with the agency, but this proposal seeks to produce legislation making that a requirement.
The new regulatory blueprint also seeks to set up a Consumer Financial Protection Agency, which will approve or reject mortgage products and set up new disclosure rules for home-loan lending, the official said.
The CFPA, an independent agency, will write rules for banks and other institutions that limits what kind of mortgage products they can make available for consumers.
The proposal seeks to expand disclosure responsibilities by requiring lenders to define standard mortgage products and promote these along with all other legal products they choose to offer.
According to the proposal, consumers should, in some cases, be able to "opt out" of standard products before they could be offered alternative products.
The plan also seeks to give the agency the ability to enforce compliance through fines and penalties. The agency could prohibit lenders from offering mortgage products which it deems unsafe to consumers.
The official added that compensation practices at firms will be reformed so that pay plans don't provide incentives that threaten safety and soundness of institutions.
The new regulatory system will also bring the largely unregulated securitization system under federal oversight.
The senior administration official said Obama will call for issuers of complex mortgage-backed securities and other similar financial products to be required to have a 5% unhedged stake in the securities they market.
House Financial Services Chairman Barney Frank, D-Mass., has pressed for such a "skin in the game" securitization process to make sure that loan originators have an incentive to make loans they believe will be repaid.
However, it is likely Treasury Secretary Tim Geithner will endorse a provision in Frank's bill that would exempt loan issuers from maintaining a financial stake in securitizations involving packaged 30-year loan mortgages. Bank lobbyists worry that by keeping a financial stake in mortgages they package and sell, they will need to hold a large amount of collateral on hand, limiting their lending power.
Obama's proposal is expected to seek additional requirements for credit-rating agencies, considered a key contributor to the financial crisis because of their high ratings for a wide-range of securitized subprime mortgages.
Specifically, the proposal is expected to require agencies to differentiate between structured products, such as securitized mortgages, and unstructured debt products, such as corporate bonds. Details about risks associated with ratings, methodologies and non-public rating data will need to be disclosed in an easy-to-understand manner.
Credit rating agencies will also need to disclose their performance measures for structured products so buyers of ratings can better compare agencies.
The official said there would be comprehensive regulation for credit default swaps, considered a key contributor to the financial crisis. He said that tailored CDS products sold on the opaque over-the-counter market will have higher capital standards and they will not be marketed to unsophisticated investors.
The White House plans to propose having all derivatives dealers, who structure transactions on the over-the-counter derivatives market to be regulated more heavily. The proposal seeks to have standardized over-the-counter derivatives moved through clearinghouses and exchanges, but does not require this for all derivatives as supported by some academics and lawmakers on Capitol Hill.
Roughly half of the trillions of dollars in derivative deals are customized swaps that would not need to go through clearinghouses. However, the proposal also seeks to have investors in tailored derivatives contracts to report their transactions to regulators.
The proposal also will call on the SEC and CFTC to harmonize regulation of derivatives through the proposed council of regulators.
Unwinding insolvent banks?
The official said that regulators should prepare for the possibility that a large interconnected firm would collapse, causing a systemic impact to the markets. All big financial institutions would need to have a plan for rapid resolution of the firm in the even it experience severe financial distress.
He added that the government needs to set up a process to unwind the institution, with appropriate protections for taxpayers.
The official did provide details about whether that government authority would reside with the Fed, the Federal Deposit Insurance Corp. or another entity.
The White House may experience opposition if it seeks to grant the Fed the authority to unwind insolvent mega-institutions. Many approaches by Congress are expected to seek giving that authority to the FDIC.
In an interview Tuesday on Bloomberg TV, Obama indicated that his proposal may call for the Fed to have resolution authority to unwind insolvent financial institutions so their collapse doesn't pose collateral damage to the markets overall.
"The other thing that [the Fed is] lacking right now is the resolution authority so that when a bank holding company breaks down, there is an ability to unwind that individual institution without bringing down the entire system," Obama said.
Ronald D. Orol is a MarketWatch reporter, based in Washington.