Regulatory Reform Plan Aimed at Protecting Larger Economy

JIM LEHRER:

President Obama laid out a plan today to reshape the federal system of financial regulation. He called for new powers and a new agency to protect investors and the larger economy.

Ray Suarez has our lead story report.

RAY SUAREZ:

The president unveiled his proposals for a regulatory reform plan in an afternoon announcement at the White House. It's billed as the biggest overhaul of its kind in decades, and Mr. Obama warned it's long overdue.

BARACK OBAMA, President of the United States: It is an indisputable fact that one of the most significant contributors to our economic downturn was an unraveling of major financial institutions and the lack of adequate regulatory structures to prevent abuse and excess.

A culture of irresponsibility took root from Wall Street to Washington to Main Street. And a regulatory regime basically crafted in the wake of a 20th-century economic crisis — the Great Depression — was overwhelmed by the speed, scope and sophistication of a 21st-century global economy.

RAY SUAREZ:

The administration's plan calls for a new agency to protect consumers by regulating credit cards and basic bank accounts, among other things. It also calls for curbs on home mortgage lenders, mandating simpler loans without hidden costs.

The 88-page plan says the Federal Reserve would supervise financial firms considered "too big to fail." A new council would monitor risk across the financial system. And the Securities and Exchange Commission would force greater disclosure by hedge funds and, for the first time, regulate credit default swaps and other exotic financial instruments.

The Obama plan stops short of a sweeping reorganization of existing agencies. The president said he sought "a careful balance" after consulting congressional leaders, industry experts, and consumer advocates.

BARACK OBAMA:

I believe that our role is not to disparage wealth, but to expand its reach, not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still makes this nation the envy of the world.

So that's our goal: to restore markets in which we reward hard work and responsibility and innovation, not recklessness and greed, in which honest, vigorous competition in the system is prized, and those who game the system are thwarted.