Treasury Secretary Henry Paulson said the 218-page plan was
not released in response to the flagging U.S. economy and current global
market turmoil, and should not be put into operation until those troubles are
The proposal would change how the government regulates
thousands of businesses from the nation's biggest banks and investment houses
down to the local insurance agent and mortgage broker, The Associated Press
Some Democrats said the plan does not go far enough to deal
with abuses in mortgage lending and securities trading exposed by the current
In Congress, House Financial Services Committee Chairman
Barney Frank, who is working on his own regulatory revamp, called Paulson's
proposal a "constructive step forward" but said it wouldn't give the
Federal Reserve enough authority to execute its expanded job to police the
stability of the entire financial system.
The plan seeks to trim a hodge-podge collection of overlapping
regulatory jurisdictions dating back to the Civil War. It would give the
Federal Reserve more power to protect financial stability while merging
day-to-day bank supervision into one agency, down from five at present.
It also would create one umbrella agency in charge of
business conduct and consumer protection, performing many of the functions of
the current Securities and Exchange Commission.
It would propose eliminating the Office of Thrift
Supervision and the Commodity Futures Trading Commission, merging their
functions into other agencies.
But the OTS director reassured employees over the weekend
that the far-reaching plan faces a treacherous path toward approval and
"Many of you might be wondering whether financial
markets restructuring is an idea whose time has finally come," John Reich
wrote, according to the Washington Post. "I don't think so, at least as it
pertains to the four federal banking agencies."
Speaking Monday in the Treasury's ornate Cash Room, Paulson
acknowledged the plan will endure a lengthy debate in Congress, leaving it to
the next administration to deal with the biggest changes proposed by the
report. He also said the current administration's focus would remain on
resolving the current severe credit crunch, which has roiled financial markets
since last August.
"It's going to take a long time to get this through.
Entrenched interests will have to be assuaged or diffused. It's like merging
Exxon and Mobil or Chrysler and Daimler. There are going to be winners and
losers," Peter Morici, professor of international business at the University of Maryland, told MarketWatch.