As pointed earlier, Obama has released the white paper (89 pages long) on what is being said as the most ambitious reform proposal for financial sector.
The President’s plan will:
Require that all financial firms that pose a significant risk to the financial system at large are subjected to strong consolidated supervision and regulation
Increase market discipline and transparency to make our markets strong enough to withstand system-wide stress and the potential failure of one or more large financial institutions
Rebuild trust in our markets by creating the Consumer Financial Protection Agency to focus exclusively on protecting consumers in credit, savings, and payment markets.
Provide the government with the tools needed to manage financial crises so it is not forced to choose between bailouts and financial collapse
Raise international regulatory standards and improve international coordination
We have heard all that so many times. Hope there is more substance to it. WSJ BLog points out to economists’ views which are mixed really. I haven’t read the report so no comments.
Ezra Klein points to an excellent glossary to help you understand all the fancy terms
I am happy to see third suggestion getting through- Consumer Financial Protection Agency. It is proposed by Liz Warren and ME had pointedthis long back (in Dec 2007). Let me admit, at that time, I didn’t think the proposal would ever go through. The reason was not as the idea was impractical etc but I thought it would never be accepted within academia, regulators and above all financial players.
I also thought the idea is pretty useful for developing economies in particular.If people find finance difficult in developed econs and need an agency, developing economies need it more urgently. I am all for financial literacy but knowing ABC of finance is just not enough to keep up with the fin world.
Look at India, we have financial products with huge variety coming out left right and centre (and people want more). With no such independent agency in place, people mostly choose products which the distributors push at them without any understanding of so called risks and return.
But yeah, next time developing economies have a report on their financial sector, we can hope to find this suggestion. Till now it must have sounded stupid but is going to become a reality in US of A. And financial players have little choice now but to accept it. Let’s see how this one is set up in US as it is not going to be easy.