WASHINGTON — The financial regulation plan that President Obama will roll out today will impose stricter and broader government oversight of the nation's banking system -- including tough new requirements on companies whose failure would threaten the economy, and creating new agencies to regulate banks and to protect consumers.
The most sweeping overhaul of financial rules since the Great Depression also would grant the Federal Reserve broad new powers to oversee large firms, such as insurance companies, that it does not regulate directly. The Fed would have the authority to seize and dismantle these companies if they are in danger of failing.
For The Record
Los Angeles Times Thursday, June 18, 2009 Home Edition Main News Part A Page 4 National Desk 2 inches; 56 words Type of Material: Correction
Regulatory reform: An article in Business on Wednesday said that under President Obama's proposal to revamp financial regulations, the Federal Reserve would gain new authority to seize and dismantle large firms in danger of failing. In fact, that power would rest with several agencies working together, including the Fed, Treasury Department and Federal Deposit Insurance Corp.
The proposal, which Obama is expected to detail in a speech at the White House, would dramatically expand the government's involvement in the financial industry in hopes of avoiding a repeat of last fall's financial crisis.
"We are going to put forward a very strong set of regulatory measures that we think can prevent this kind of crisis from happening again," Obama said Tuesday.
The plan must be approved by Congress. In drafting the measures, Obama administration officials had two key concerns -- moving quickly, before the momentum for reform evaporates, and avoiding withering turf battles with regulators and lawmakers that could derail the effort.
"We want to get this thing passed and . . . we think that speed is important," Obama told CNBC, as he targeted his message to Wall Street in a series of interviews. "We want to do it right, we want to do it carefully, but we don't want to tilt at windmills."
The most controversial part of the plan could be the creation of a Consumer Financial Protection Agency. It would have authority to enact new rules over credit cards, mortgages and other consumer products, and levy penalties for companies that violate them. The agency would assume responsibilities now scattered across several agencies, with its main focus on protecting consumers, Obama said.
The agencies that now share those responsibilities, including the Federal Reserve, are expected to fight against the loss of their power. Indeed, the Securities and Exchange Commission appears to have won a turf battle by preserving its oversight of mutual funds, one of the most popular consumer financial products.
Business groups are likely to lobby against various aspects of the plan, with the support of many Republicans who argue that the measures needlessly expand government oversight.
