MARTIN CRUTSINGER AP Economics Writer WASHINGTON
The Bush administration is proposing the most sweeping overhaul of the financial regulatory system since the Great Depression. The plan 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. Treasury Secretary Henry Paulson unveiled the 218-page plan in a speech in the Treasury's ornate Cash Room. He declared that a strong financial system was important not just for Wall Street but also for working Americans. The administration's plan was already drawing criticism from Democrats that it does not go far enough to deal with abuses in mortgage lending and securities trading that were exposed by the current credit crisis. The plan, which would require congressional approval for its biggest changes, seeks to trim a hodge-podge collection of overlapping jurisdictions that date back to the Civil War. It would give the Federal Reserve more power to protect the stability of the entire financial system while merging day-to-day bank supervision into one agency, down from five at present. It also would create one super agency in charge of business conduct and consumer protection, performing many of the functions of the current Securities and Exchange Commission. It would, in addition, ask Congress to establish a federal Mortgage Origination Commission to set recommended minimum licensing standards for mortgage brokers, many of whom now operate outside of federal regulation, and it would also take a first step toward federal regulation of the insurance industry by asking Congress to establish an Office of Insurance Oversight inside the Treasury Department. Paulson acknowledged in his remarks that most of the changes will not occur until after 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 Bush administration's focus would remain on getting through the current severe credit crisis, which has roiled financial markets since last August. Paulson rejected Democratic charges that it was lax regulation of mortgage brokers and the financial industry that had led to the current problems. "I do not believe it is fair or accurate to blame our regulatory structure for the current market turmoil," he said. "I am not suggesting that more regulation is the answer or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to 10 years."