First, the core of the plan was devised more than a year ago to reflect Paulson's -- and the president's -- conviction that the U.S. must lighten regulations on its financial industry or risk losing business to foreign financial centers such as London and Hong Kong.
But the proposal is being unveiled after the sub-prime mess, the housing meltdown and sliding financial markets left tens of millions of people poorer and more pessimistic.
It is also subject to the judgment of a Democratic-controlled Congress in no mood to give financial firms more leeway.
"We must restore the trust and confidence of investors and consumers," Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) said in a statement. "That trust has been shattered -- not because regulators did too much, but because they did too little."
Second, the plan has already revived a series of nasty spats among interest groups that scuttled previous bids to restructure financial oversight.
For example, the administration's call to give insurance companies -- overseen by state regulators for more than a century -- the option of adopting a federal charter and being federally regulated has raised the hackles of state officials.
In many states, including California, officials saw the overhaul plan as treading on their turf and said that, unless changes were made, they would fight it.
"The Bush administration's colossal expansion of federal powers . . . must not come at the expense of states, many of whom have led the way in strong regulatory financial reforms," said Ted Lieu (D-Torrance), chairman of the California Assembly's Banking and Finance Committee. "The Treasury Department's current proposals will cut us off at the knees."
Similarly, the administration's proposal to consolidate the Securities and Exchange Commission, which regulates most stocks, and the Commodity Futures Trading Commission, which regulates complex futures contracts, has provoked pointed objections from the agencies themselves as well as the chairmen of their congressional oversight committees.
Walter Lukken, acting chairman of the Commodity Futures Trading Commission, warned in a statement that combining the two agencies could "jeopardize" the commission's "market expertise, manageable size, problem-solving culture and global outlook."
peter.gosselin@latimes.com
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Upgrading oversight
