The current financial regulatory system “is riddled with gaps, weaknesses, and jurisdictional overlaps,” Treasury Secretary Timothy Geithner and Obama economic guru Larry Summers write in today’s Washington Post. They outline, in broad strokes, their plan to fix it:
- Capital and liquidity requirements will be raised across the board.
- “Too-big-to-fail” firms will be subject to supervision from the Federal Reserve and a council of regulators.
- Purveyors of asset-backed securities will have to retain a financial interest in those securities’ performance.
- They’ll also face “robust reporting requirements,” intended to limit investor reliance on rating agencies.
- Futures and securities regulation will be streamlined, and all derivatives will be subject to regulation.
- The administration will set up a “resolution mechanism” for dealing with big, failing firms in “extraordinary circumstances.”
- The US will push for upgrades in regulation and supervision worldwide.