Henry Paulson

In light of the recent turmoil in the housing and financial markets Treasury Secretary Henry Paulson will release a proposal for revamping the regulatory agencies monitoring the U.S. financial system:

Mr. Paulson’s plan will include merging some agencies, such as the Securities and Exchange Commission with the Commodity Futures Trading Commission, while broadening the authority of others, such as the Federal Reserve, which appears to be a winner under the proposal. Mr. Paulson is expected to recommend that the central bank play a greater role as a “market stability regulator,” with broader authority over all financial market participants.

Mr. Paulson is also expected to call for the Office of Thrift Supervision, which regulates federal thrifts, to be phased out within two years and merged with the Office of the Comptroller of the Currency, which regulates national banks. One reason is that there is very little difference these days between federal thrifts and national banks.

The Treasury plan has been in the works since last year but has taken on greater prominence since the onset of the housing crisis and ensuing credit crunch. Critics have blamed lax regulation at both the state and federal level for exacerbating the crisis.

This proposal is merely a step towards changes. The Democratic Congress has ideas of their own.

“Sweeping Changes in Paulson Plan