On the reform of the financial system

Given the official plan will be out in a matter of hours, I would probably just skip out on most of the details and post some of the main ones here.

From the WSJ:

President Barack Obama’s plan will touch almost every corner of financial markets, from tougher consumer-protection policies to stricter rules over exotic financial products, such as credit derivatives.

The plan is also expected to dissolve the Office of Thrift Supervision and replace it with a new national regulator.

The government would also gain power to take over ailing financial institutions as well as power in payments and settlement systems.

Hedge funds and private equity groups would also now have to register with the SEC.

The Financial Times is also giving details of the Fed’s bigger role/power when it comes to ensuring the financial system remains stable.

From the FT:

Mr Obama will propose giving the Fed powers to address the build-up of risks that threaten the system as a whole, with a focus on core institutions and financial markets. It will not require that the Fed seek approval from the council of regulators to act against systemic risks. The new systemic risk powers for the Fed will be accompanied by tougher capital requirements for banks – particularly the most important banks – and moves to strengthen the infrastructure of core financial markets.

But this increased power is worrying other people.

Again from the FT:

…the exercise of systemic risk powers will entangle it in political fights that will undermine its ability to operate an independent monetary policy. The wider regulatory reform plan has already attracted criticism from bankers who say it will add to the cost of capital.

More on the plan when it comes out later.

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