Treasury set to announce regulatory overhaul

Monday, March 31, 2008

Treasury Secretary Henry Paulson will reveal in full sweeping new plans on Monday for streamlining a hodgepodge of regulation faulted for permitting the U.S. mortgage crisis to balloon into a full-blown economic threat.

The regulatory blueprint proposes vesting new powers as a "market stability regulator" in the Federal Reserve -- effectively formalizing a role it already has been performing by providing liquidity to investment banks and lowering official interest rates.

It would give the U.S. central bank authority to demand that all financial system participants supply it with full information on their activities and grant the Fed a right to collaborate with other regulators in setting rules for their behavior.

Among changes, Treasury wants to merge the Securities and Exchange Commission, the U.S. markets watchdog, with the Commodity Futures Trading Commission that is charged with overseeing the activities of the nation's futures market.

It also recommends getting rid of a Depression-era charter for thrifts that was intended to make it easier to obtain mortgage loans, saying it is no longer necessary. That would mean closing the Office of Thrift Supervision and transferring its duties to the Office of the Comptroller of the Currency that oversees national banks.

In one important change to try to clamp down on mortgage brokers, Treasury is urging the establishment of a "Mortgage Origination Commission" made up of regulatory agency representatives that would be able to set licensing standards for mortgage brokers.

(additional writing by Gerrard Raven in London)