Paulson Proposes Regulatory Overhaul

Paulson Proposes Regulatory Overhaul


Treasury Secretary Henry Paulson has proposed a series of regulatory reforms focused on lessoning future market turmoil and preventing crises like the current one. The effect would be to make the Federal Reserve far more powerful, giving it regulatory control over all financial institutions that operate with government guarantees including the insurance industry. The plan would also streamline the current system by merging certain agencies and eliminating redundancies.

Almost all of Paulson’s plan would require Congressional approval and most of it would not be in place until the next president takes office. Given the dramatic changes in the financial industry over the last ten to twenty years, updating our regulatory structure is a necessity. Hopefully Congress will be willing to work with Treasury Department officials as well as industry experts to develop a system that can adequately balance the need for oversight with the need for market flexibility. Too much regulation can be as harmful to financial systems as too little, so none of us should be upset that developing suitable reforms may take awhile.

  • gerryf

    So, let me et this straight…we are going to give even more power to an entity that answers to virtually no one, makes many of its decisions in secret, which has repeatedly made poor decisions and lacks oversight by any one who is accountable.

    I have a better idea…hey congress, do your freaking job.

  • Jim S

    Someone has to do the grunt work after Congress lays out the rules. If not the Fed then it would have to be a greatly revamped and strengthened SEC.

  • wj

    Right, Gerry. You expect (hope for?) a good job from an organization which has gerrymandered its districts so incumbants are mostly in for life, makes its decisions based on which lobbyist pays the best, and has repeatedly made poor decisions. I think it is at least arguable that the Fed has made fewer mistakes which harmed the economy than the Congress has.

  • TerenceC

    Giving the Federal Reserve more power is a disaster – it allows for the Federal government to exert enormous influence over a capitalist economy through an entity that is part “private” and part “public” banking system. The whole idea behind the Federal Reserve is to prevent financial panics leading to “runs” on a bank. No one keeps their money in banks, no one saves, banks sell insurance, credit cards, securities, bonds, mortgages, and loans (among other things) – if anything the Federal Reserve has outlived it’s usefulness and should be dismantled, it isn’t deserving of additional powers because it’s main function (lowering and raising of interest rates for overnight lending) is largely irrelevant. There are 3 branches of government not 4 – I fear that the already corrupt system would get even worse and the ultimate victim would once again be the people of the USA.

  • gerryf


    while some of what you say is true, the congress in the past has done many great things when push comes to shove. I am not an advocate of crisis management, but I am an advocate of representative democracy which works when the people are engaged. They are engaged now more than they have been in a long while–maybe not enough, but it is a start.

    And I prefer that hope to the bleak promise of a Federal Reserve that has bumbled along for nearly 20 years. And despite the fact that the board is made up of people who server 14 year terms, this has not proven itself to be a firewall to political appointments that ultimately favor a political ideology, the one lone supposed positive of the Fed.

    Do you want to know why the Fed was able to move so quickly to bail out Wall Street–a Wall Street made up of people who decry bailouts for anyone but themselves? Because at present, there are five sitting federal reserve members–all appointed by Bush, with two seats vacant. A fed pushing the policies of the worst president since Hoover. Gee, I wonder why things are so bleak.