REFORM
Views mixed on financial reform
By David J. Lynch, Sue Kirchhoff and Adam Shell
USA Today
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The Federal Reserve's role in monitoring the health of financial institutions would dramatically expand under a plan the Bush administration unveiled yesterday to overhaul regulatory oversight.
The plan — which critics said was sure to be modified by Congress — capped a yearlong process that began with a desire to help U.S. financial players compete globally by streamlining their oversight and ended amid fear of a meltdown fed by lax regulation.
Treasury Secretary Henry Paulson, who unveiled the 218-page blueprint for reform, acknowledged that the far-reaching proposal represents just the start of a long political process.
He also fired back at critics who complained that the plan would do nothing to address regulatory failures that led to the current crisis.
"The overhaul of our financial and regulatory system is inevitable," Paulson said. "This is going to take time — a lot of time — but we have a responsibility to begin this discussion now."
The Treasury Department plan, the product of consultations with financial market participants, academics and former government officials, takes aim at what it calls an outdated regulatory structure that financial innovation has left behind.
The blueprint would:
On Capitol Hill, Paulson's proposal drew a cool reception from the majority Democrats.
Even those who welcomed it said they don't see it passing in an election year.
A YEARLONG EFFORT
Rep. Barney Frank, D-Mass., who chairs the House Financial Services Committee, called it "a constructive step forward (in) a profound national discussion that cannot be concluded in the months before the election."
Senate Majority Leader Harry Reid, D-Nev., and Senate Banking Committee Chairman Chris Dodd, D-Conn., told reporters that they are focused on passing a bill to address the rising number of home foreclosures, a crisis that the administration's proposal would not address.
That bill, which Republican lawmakers are blocking, would let bankruptcy judges rewrite the terms of mortgages.
"I would call this the wild pitch," Dodd said of the Bush administration plan in a conference call with reporters. "It's not even close to the strike zone. Clearly, this has nothing to do with the current problems we're facing."
The verdict was harsher on the presidential campaign trail, where Sens. Hillary Rodham Clinton, D-N.Y., and Barack Obama, D-Ill., both took shots at the administration's game plan.
In a statement, Clinton derided the blueprint, saying it "comes late and falls short."
Even as he introduced the sweeping proposal, Paulson took pains to stress that it had been in the works for a year and was not a response to the current financial crisis.
Asked how much the plan had been affected by the recent turmoil in credit markets, he replied, "Not much."
The Treasury secretary, a former CEO of investment bank Goldman Sachs, suggested that the economy is destined to tumble into a crisis "every five to 10 years," no matter what regulatory structure is adopted.
Still, if enacted, the administration's proposal would drastically reshape the way Washington controls several major elements of the U.S. economy.
