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WP/CNN: Treasury Wants to Reshape Regulation Powers (merged x 3, M.E.T.)

SnyderShrugged

By SnyderShrugged
in The Tailgate

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SnyderShrugged

SnyderShrugged

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http://www.cnn.com/2008/US/03/28/financial.oversight/index.html

I am stunned. An agency with nearly zero transparancy, not within the confines of elected government, and what many economists believe is the literal root cause of the recent financial mess we are having, is now being given nearly carte blanche control of the entire economy? :mad:

They even reference "broadening the focus of a presidential working group on financial markets", which many hear were claiming as a "conspiracy theory" topic back a few months ago when Ron Paul nailed McCain with a question regarding the groups transparancy and secretive nature.

Does anyone else have a significant problem with this too?

WASHINGTON (CNN) -- The Federal Reserve would have the power to regulate virtually the entire banking and securities industry under proposals to be unveiled Monday by Treasury Secretary Henry Paulson, according to a summary of the proposals provided to CNN late Friday.

Treasury Secretary Henry Paulson will introduce the proposals in a speech Monday, a spokeswoman says.

Paulson will introduce the proposals, designed to modernize the financial oversight structure, in a speech Monday, said Treasury Department spokeswoman Michele Davis.

While Davis said the proposals have been in the works since June -- two months before the sub-prime mortgage crisis began affecting financial markets -- it is a long-term restructuring project that is at least in part a response to criticism the federal government has not been ahead of the current problems.

Some of the proposals -- broadening the focus of a presidential working group on financial markets and tightening oversight on mortgage originators -- are classified as short-term recommendations, while the department expects the rest to take time to finalize.

Davis said the department does not expect to finish those longer-term proposals before President Bush leaves office next year. Instead, she said, Paulson is trying to start the process of creating "a better regulatory framework so we're in better shape next time" there is a rough patch in economy.

The banking and financial industry regulation structure has been developed over decades, from the establishment of the national bank charter in 1863 to the creation of the Federal Reserve system in 1913 to recent changes made in response to other crises. Now, however, the ever-expanding complexities of global markets have largely outgrown some of the structure's component parts, creating weaknesses and redundancies.

Paulson will propose the Federal Reserve have authority to look at the financial status of any institution that could affect market stability; the Securities and Exchange Commission merge with the Commodity Futures Trading Commission; stock exchanges have more room for self-regulation; and bank supervision be consolidated into one regulator, according to Brookly McLaughlin, another department spokeswoman.

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One of the most dramatic changes would extend the powers of the Federal Reserve -- designed to regulate the commercial banking industry -- to oversight of virtually the entire financial industry.

That change would make the Fed the first responder to a potential financial crisis. Currently, several agencies and commissions have oversight over various parts of the industry, but none has the broad authority.

The proposed change would help the oversight and regulatory system catch up with the events of the last two weeks, when the Federal Reserve intervened to facilitate the sale of failing brokerage Bear Stearns to JP Morgan Chase.

Nearly all the proposals will require the approval of Congress, where Democrats are already at work on their own proposals. Sen. Charles Schumer, D-New York, said Democrats "agree with large parts" of Paulson's plan but think the proposals should go further.

"Very complex financial instruments have evolved in recent years, like [collateral debt obligations] and credit default swaps, which pose potential problems in terms of systemic risk," he said. "The Treasury Department should address these issues as well."

Initial response from the financial industry was positive. Tim Ryan, president and CEO of the Securities Industry and Financial Markets Association, called Paulson's proposals "a thoughtful and sweeping plan."

"Our present regulatory framework was born of Depression-era events and is not well suited for today's environment where billions of dollars race across the globe with the click of a mouse," he said. "That fact, teamed with the current market conditions, results in a universal agreement that it is time to modernize and revitalize the current system." E-mail to a friend

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Cskin

Cskin

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Nice... an Unconstitutional entity from it's birth now having oversight over the world's biggest economy. :doh:

I swear, the dumbing down of America has been a boon for the elitist who have no regard for the US Constitution.

Wake Up America... the powerful few are stealing your country.

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Mass_SkinsFan

Mass_SkinsFan

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Wake Up America... the powerful few are stealing your country.

No they're not. The citizenry of this country, as stupid and uninterested as the majority of the sheeple here are has GIVEN the country away to these power-hungry politicians and unelected individuals. You really can't steal something that somebody put on the curb with a sign saying "Free" attached to it.

That's part of why I say nothing short of a violent revolution with a total overthrow of the government and an institution of a new, much more specific style of government is ever actually going to fix the issues that are going on.

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SkinsHokieFan

SkinsHokieFan

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Big big thumbs down. I have officially gone from "nuetral" on Bush to negative. The lesson people, if you screw up and make a poor decision, Washington DC will bail you out. (And for the record, I am opposed to the Bear Stearns buy out in a big way)

Bush Readies Mortgage Aid Plan

At-Risk Owners Could Get Cheaper Loans

By Lori Montgomery and David Cho

Washington Post Staff Writers

Saturday, March 29, 2008; A01

The Bush administration is finalizing details of a plan to rescue thousands of homeowners at risk of foreclosure by helping them refinance into more affordable mortgages backed by public funds, government officials said.

The proposal is aimed at assisting borrowers who owe their banks more than their homes are worth because of plummeting prices, an issue at the heart of the nation's housing crisis. Under the plan, the Federal Housing Administration would encourage lenders to forgive a portion of those loans and issue new, smaller mortgages in exchange for the financial backing of the federal government.

The plan is similar to elements in legislation proposed two weeks ago by Barney Frank (D-Mass.), who chairs the House Financial Services Committee, officials said. Administration officials said they believe they can accomplish some of the same goals through regulatory changes, though important details have yet to be nailed down.

If enacted, the plan would mark the first time the White House has committed federal dollars to help the most hard-pressed borrowers, people struggling to repay loans that are huge relative to their incomes and the diminished value of their homes. That may offer encouragement to the banking industry and help silence Democrats, who have accused the White House of rescuing Wall Street investment banks while ignoring distressed homeowners. But it could agitate conservatives, who are likely to view the FHA plan as yet another government bailout.

Senior officials in several parts of the administration described the plan on condition of anonymity because the specifics are still being worked out. It is unclear when the plan will be formally unveiled, though one official said it was unlikely to happen before the president returns from a trip to Europe next week.

"The administration for a long time had the idealists and the pragmatists. And because the market conditions are what they are right now, the pragmatists are looking at this and saying, 'How can we achieve something?' And they seem to be having more sway," said Francis Creighton, vice president for government affairs at the Mortgage Bankers Association, which has been working with Frank on his proposal.

The initiative now being crafted could provide relief to a select group of homeowners who are "under water" on their mortgages, a term that describes the situation when falling home prices leave borrowers with negative equity. These homeowners would have to agree to stay in their homes after refinancing, be able to afford the new monthly payments and have lenders who are willing to go along with the plan, officials said.

Administration officials have yet to iron out other details, such as how big the new mortgage should be relative to the home's value.

An estimated 8.8 million households currently have negative equity, due in part to the rise of loans that often required no money down. Negative equity becomes a problem when the homeowner can no longer make mortgage payments. If the homeowner had some equity, the loan could be refinanced or the house could be sold. But a homeowner who is under water cannot afford to do those things because the new loan or sale proceeds would not cover the cost of the existing mortgage.

Treasury Secretary Henry M. Paulson Jr. signaled in a speech Wednesday that the administration was developing an initiative tailored to this specific problem, saying "the people we seek to help" are those who want to keep their homes but are falling behind on their payments. "If they also have negative equity in their homes, refinancing becomes almost impossible and so workouts become even more important," he said. He credited Alphonso Jackson, secretary of the Department of Housing and Urban Development, with helping to craft the plan.

In a recent report, Merrill Lynch identified negative equity as a prime cause of rising default rates, saying borrowers who already have poor credit records are often deciding it makes sense to walk away from their homes when the values fall.

Federal Reserve Chairman Ben S. Bernanke has called on lenders to restructure some loans, arguing that it would be less costly to forgive some debt than to foreclose on the properties.

So far, the centerpiece of the administration's effort to address foreclosures has relied on a private alliance, called Hope Now, to streamline the process for refinancing, modifying mortgages and offering delays for some on the brink of foreclosure. Lenders have been reluctant, however, to offer actual reductions in loan principal.

To spur bankers to action, Frank and other Democrats are working on legislation that would allow the FHA to insure an additional $300 billion in mortgages on which lenders have agreed to accept partial losses. Under Frank's proposal, the new loan could be worth no more than 85 percent of the home's current appraised value. It would also have to meet FHA loan limits, which were raised significantly by the economic stimulus bill recently signed by the president and are currently set at about $730,000 in the Washington area. Homeowners would have to meet stringent eligibility requirements and would be required to share any profits if they sold or refinanced within five years.

Frank estimates that his plan could save as many as 2 million homeowners from foreclosure. Administration officials said their plan is likely to help far fewer people. These officials remain strongly opposed to other elements of Frank's legislation, including a provision to spend $10 billion buying vacant foreclosed homes.

Depending on its final scope, the proposal could further rile conservatives in Congress alarmed by what they see as a new tendency by the White House to interfere with market forces. The Fed's decision to arrange the purchase of beleaguered Wall Street investment bank Bear Stearns by J.P. Morgan Chase -- with the blessing of the White House -- has already generated grumbling.

Earlier this week, Iowa Sen. Charles E. Grassley, the ranking Republican on the Senate Finance Committee, joined the committee's chairman, Max Baucus (D-Mont.), in raising questions about the Bear Stearns deal and demanding information about the role Paulson played in the transaction.

"I've been hearing from the administration that they weren't going to do things" that reward risky behavior. "I want that affirmed," Grassley said. "To the extent that Treasury or the White House was pushing Bernanke to do something . . . that would really disturb me."

Many conservative analysts who oppose government intervention in financial markets nonetheless support the Bear Stearns deal.

Sen. Tom Coburn (R-Okla.) said he hoped that "the administration is not into subsidizing stupid behavior. It's one thing to help people who made a rational decision, who were spammed or defrauded. But it's another thing to reward people who thought they were getting something for nothing, and knew what they were getting into."

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twa

twa

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It seems to be a bad idea and helps to keep home values artificially high.

The requirement for the lenders to forgive a portion to gain federal guarantees is sensible,but would enough of them embrace it when they can simply write off losses on foreclosures?

It would seem to appeal only those lenders that seriously over extended to the point of failure.

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Burgold

Burgold

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Treasury Wants to Reshape Regulation

Overhaul Would Include New Agencies, Powers

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/29/AR2008032900094.html?hpid=topnews

By David Cho

Washington Post Staff Writer

Saturday, March 29, 2008; Page A01

The Treasury Department on Monday will propose a far-reaching overhaul of the nation's financial regulatory structure that would reshape the relationship between Wall Street and Washington and redefine the responsibilities of some of the federal government's most powerful agencies, according to administration officials.

The initiative calls for some long-standing government agencies to combine and others to disappear. Major players at the core of the nation's financial system, including banks, securities firms, insurance companies, commodity investors, and mortgage firms and brokers, may have to submit to increased oversight.

The Federal Reserve would gain the power to investigate any aspect of financial institutions that threatens the stability of the entire system, gathering information and taking action to combat risks to the financial system as a whole.

The Securities and Exchange Commission would lose some of its authority in the restructuring and be combined with the Commodity Futures Trading Commission, which regulates the trading of natural gas, oil and other goods.

Most of the plan, which Treasury officials call a "regulatory blueprint" for the coming years, will require congressional action. While getting bills passed appeared to be a remote possibility a year ago when work on the initiative began, the credit crisis and the near-collapse of the 85-year-old firm Bear Stearns have changed the political environment on Capitol Hill. Now even some Republicans, who normally oppose government intervention, are conceding that Washington needs to keep a closer eye on Wall Street.

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Burgold

Burgold

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Whoops. Sorry about that. WP versus CNN, I guess. Probably should be merged.

Yeah, even as someone like me who leans kinda liberal and believes that the government should help the little guy is getting a dystopia vibe from this. I do believe in oversight and checks and balances, but there is something foreboding about the way I'm interpreting this.

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SnyderShrugged

SnyderShrugged

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Whoops. Sorry about that. WP versus CNN, I guess. Probably should be merged.

Yeah, even as someone like me who leans kinda liberal and believes that the government should help the little guy is getting a dystopia vibe from this. I do believe in oversight and checks and balances, but there is something foreboding about the way I'm interpreting this.

amen brother, in this both left and right should be concerned.

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Burgold

Burgold

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Yup. I saw this in the Post this morning and definately get a scary, dystopian, Big Brother vibe out of this. I normally am for oversight and checks and balances, but there is just something in the way I am reading this that sounds dangerous.

Besides, this is the kind of things the loonies on the liberal side are supposed to do. Not the Crazies of the conservatives.

I thought you guys were all about limiting government power?

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SkinsHokieFan

SkinsHokieFan

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Yup. I saw this in the Post this morning and definately get a scary, dystopian, Big Brother vibe out of this. I normally am for oversight and checks and balances, but there is just something in the way I am reading this that sounds dangerous.

Besides, this is the kind of things the loonies on the liberal side are supposed to do. Not the Crazies of the conservatives.

I thought you guys were all about limiting government power?

President caving in to the Democrats cries of "not doing enough for the economy"

It is absolute BS to compromise in this way, in a way which will only have negative effects on the economy

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SkinsHokieFan

SkinsHokieFan

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It seems to be a bad idea and helps to keep home values artificially high.

The requirement for the lenders to forgive a portion to gain federal guarantees is sensible,but would enough of them embrace it when they can simply write off losses on foreclosures?

It would seem to appeal only those lenders that seriously over extended to the point of failure.

It is a ridiculously bad idea, and American citizens should shout this down

But the President is once again caving to a powerless Dem Congress and Dem attacks and needs to show he is "doing something"

As we have learned, the more the gov't tries to do, the worse things get. Let this mess play itself out

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Burgold

Burgold

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President caving in to the Democrats cries of "not doing enough for the economy"

It is absolute BS to compromise in this way, in a way which will only have negative effects on the economy

Not sure if this is true. This sounds like part of the Bush/Cheney doctrine which in all honesty is not really Republican or Conservative. It sounds like an extension of their vision for the Department of Homeland Security.

I do think that the Dem cries may have led to this knee-jerk proposal. Luckily (I hope) Bush is a lame duck and the Dems barely have a majority in Congress. I doubt that they would allow anything this historic, controversial or dangerous happen in Bush's final moments. It would be too powerful a legacy.

And like many of the ideas of the Bush Administration, one whose short sightedness will likely lead down a negative path.

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