Bush Administration To Unveil Broadest Overhaul Of Wall Street Regulation Since Great Depression
The Bush administration is proposing the broadest overhaul of Wall Street regulation since the Great Depression. But the plan, to be unveiled on Monday, has its genesis in a yearlong effort to limit Washington's role in the market.
And that DNA is unmistakably evident in the fine print.
Although the proposal would impose the first regulation of hedge funds and private equity funds, that oversight would have a light touch, enabling the government to do little beyond collecting information -- except in times of crisis.
The regulatory umbrella created in the 1930s would grow wider, with power concentrated in fewer agencies. But that authority would be limited, doing virtually nothing to regulate the many new financial products whose unwise use has been a culprit in the current financial crisis.
The plan hands vast new authority to the Federal Reserve, essentially formalizing what has been an improvised process over the last three weeks. But some fear that the central bank's role in creating the current mess will undercut its ability to clean it up.
All the checks and balances in the plan reflect the mindset of its architect, Treasury Secretary Henry M. Paulson Jr., who came to Washington after a long career on Wall Street. He has worried that any effort to substantially tighten regulation could hamper the ability of American markets to compete with foreign rivals, though he has intervened in the mortgage crisis to try to persuade banks to offer concessions to some troubled borrowers.
As the full effect of the credit crisis becomes clearer, the political stakes are growing.
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New York Times | By NELSON D. SCHWARTZ and FLOYD NORRIS | March 29, 2008 10:26 PM