Obama to Announce Financial System Overhaul

by Leigh Graham · 2009-06-16 09:00:00 UTC
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Later this week, President Obama will lay out a comprehensive plan to overhaul our nation's financial system.  Will it deliver the vast regulation and reform we need to control the excessive risk-taking of the last decade?  Will it curb irresponsible, freewheeling lending?  Or will it be anemic or a non-starter, like a few too many of his big plans?

Treasury Secretary and Guy-With-Too-Much-Power economic advisor Larry Summers give us a sneak peak of what to expect:

  1. To stabilize the whole "system," capital and liquidity requirements for individual banks will go up, interconnected banks will be under "consolidated supervision" by the Fed, a "council of regulators" will keep an eye on the system.

  2. Originators of securitizations will have to retain a financial stake, credit agencies will no longer be as influential, and asset-backed securities will come with stricter reporting requirements.  Derivatives will be regulated by people who can actually "enforce" the rules.

  3. This one concerning predatory lending may be the most vague, or maybe just the most vague using the least fancy terms.  Either way, it's worrisome for the majority of us: "the administration will offer a stronger framework for consumer and investor protection across the board."

  4. Wait, this one's real vague too.  Either Geithner and Summers ran out of steam, WaPo edited this, or they're really just thinking out loud on these.  Concerning all the bailouts by the Fed, this will cease, to be replaced by "a resolution mechanism that allows for the orderly resolution of any financial holding company whose failure might threaten the stability of the financial system. This authority will be available only in extraordinary circumstances, but it will help ensure that the government is no longer forced to choose between bailouts and financial collapse."  Didn't Paulson get down on one knee last fall begging Congress to take "extraordinary" measures?

  5. "We will lead the effort to improve regulation and supervision around the world."  Because our credibility is strong.  Good plan!

/snark.

Seriously though, what do you expect and what do you hope to hear?  Let's stay tuned, shall we?

(Obama and his Economic Team, Press Conference from the Obama-Biden Transition Project)

Leigh Graham
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