On March 31, 2008, the U.S. Department of the Treasury issued its "Blueprint for a Modernized Financial Regulatory Structure," which was developed before the current financial turmoil. In fact, in announcing the Blueprint, Treasury Secretary Paulson stated that its recommendations are not intended as a response to current conditions and, with few exceptions, would not be implemented until after the present market difficulties subsided.
The Blueprint reflects an objectives- or principles-based approach to regulation and presents a series of short-, intermediate- and long-term recommendations for broad-ranging reform of the U.S. financial regulatory structure. The short-term recommendations propose changes to improve regulatory coordination and oversight immediately, including creating a new federal commission for mortgage origination to evaluate the adequacy of each state system for regulating participants in the mortgage origination process and clarifying liquidity provisioning by the Federal Reserve to provide it with more information during the current market turmoil.
The intermediate-term recommendations focus on eliminating some of the duplication in the U.S. financial regulatory system and try to modernize the regulatory structure within the current framework. Proposals include transitioning the federal thrift charter for federal savings associations to the national bank charter, creating an optional federal charter for insurance companies to encourage a more competitive U.S. insurance industry (insurance companies are currently regulated by the states, thereby making the process of developing national products cumbersome and more costly) and providing unified oversight for futures and securities by merging the SEC and the Commodity Futures Trading Commission (CFTC) and having the more rules-based SEC adopt the more principles-based regulatory philosophy of the CFTC.
Finally, the Blueprint proposes an objectives-based long-term optimal regulatory model, which would consist of a market stability regulator, a prudential regulator and a business conduct regulator that would focus on consumer protection.
Given the sweeping nature of the proposals and the fact that they would affect a large number of special interests, it is highly unlikely that any significant portion of the Blueprint will be enacted in the near future. This is particularly the case in light of the United States' change in administration in the near future.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
