Released: October 16, 2008

Lawmakers consider regulatory overhaul

Source: Michael Rosenwald & David Cho, Washington Post (Free Registration)

As the nation’s financial system continues to unravel, lawmakers on both sides of the aisle say the U.S. government appears poised to enact sweeping changes to the spider web of agencies that regulate banks and other financial firms.

There is no scarcity of ideas. From Capitol Hill come calls to eliminate some agencies altogether. There’s the Treasury Department’s “blueprint” for an overhaul, which lawmakers now say is far more pressing than when it was released in the spring. And from think tanks come 10-point plans with proposals that seemed pie-in-the-sky only months ago. Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, plans to hold hearings on the matter in January. “The crisis has clearly accelerated things,” he said.

The subprime mortgage meltdown and ensuing credit crisis revealed gaping holes in U.S. regulation, which has not kept up with the market’s ever-evolving activities. Recent market inventions, including exotic mortgage securities and derivatives, have caused major financial firms to buckle and are threatening to sink the economy into a severe recession. 

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