Reporting from Washington -- The Obama administration this week will propose the most significant new regulation of the financial industry since the Great Depression, including a new watchdog agency to look out for consumers' interests.
Under the plan, expected to be released Wednesday, the government would have new powers to seize key companies -- such as insurance giant American International Group Inc. -- whose failure jeopardizes the financial system. Currently, the government's authority to seize companies is mostly limited to banks.
But critics say the easing of the financial crisis that gripped the country last year appears to have reduced the momentum for some of the most far-reaching proposals, such as merging several banking regulatory agencies.
They're also concerned that the proposed agency whose mission would be to protect consumers against financial misconduct wouldn't have the authority to do so for a wide-enough range of products."This is too little, too late," said Rep. Brad Sherman (D-Sherman Oaks), based on his understanding of the plan. "It's going to be way less than it should be."
On Monday, Obama administration officials sketched the outlines of the plan the president is to unveil Wednesday. They said it would seek to reduce gaps in regulatory oversight, rein in the use of mortgage-backed securities and other complex derivatives, reduce incentives for companies to take excessive risk and give the government new power to quickly intervene during any future crises. "We had a system that proved too unstable, too fragile. . . . Those are things we have to change,"
Treasury Secretary Timothy F. Geithner said Monday at an economic forum in New York.The administration also is expected to propose creation of a regulatory body for financial products marketed to consumers, such as credit cards, whose oversight is now spread over several agencies.
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