WASHINGTON — Treasury Secretary Henry M. Paulson Jr.'s blueprint for regulatory reform, officially unveiled Monday, sets the stage for a confrontation with Congress by offering no relief for troubled homeowners and in many instances advocating less, not more, federal supervision of the nation's financial system.
Paulson proposed the broadest restructuring of federal regulatory institutions in 75 years with a call to merge agencies and redraw lines of authority that in some cases go back to the Great Depression. But the plan would put off for years any attempt to create new regulations for the streamlined system to enforce.
As a result, even if the new structure were eventually adopted, it would do little to prevent a repeat of the current crisis or something similar, the Treasury secretary acknowledged.
The limits of the administration's approach drew immediate criticism from Democrats as well as some analysts.
"In a different time, the administration's proposal would be a welcome start to a needed debate about modernizing the financial services regulatory system," said Ellen Seidman of the New America Foundation, a centrist think tank in Washington. "But this proposal does not deal with the root causes of our current crisis."
Paulson said that upheavals have become a regular, if unfortunate, part of the financial system's operation.
"I am not suggesting that more regulation is the answer, or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to 10 years," the Treasury chief said Monday while unveiling the 218-page plan.
House Speaker Nancy Pelosi (D-San Francisco) called Paulson's plan a "step in the right direction" but said, "We need to go further."
"We must take steps now to provide help to families who are hurting" because of mortgage foreclosures and job losses, she said in a statement.
Paulson's proposal reflects both the Bush administration's aversion to government intervention in the economy and his own experience on Wall Street.
"He's taking advantage of the current crisis to push a regulatory restructuring plan that would otherwise attract no interest," said Robert Litan, a senior fellow at the nonpartisan Brookings Institution in Washington.
Paulson, the former chairman and chief executive of investment giant Goldman Sachs Group Inc., described Washington's regulatory apparatus as utterly outmoded and outflanked by market innovations such as sub-prime mortgages and mortgage-backed securities.
