18:56
Barack Obama will propose a broad reform of U.S. financial system
The Obama administration needs to present on Wednesday the most ambitious project to reform the financial system since the 1929 crisis, a whole battery of new operating rules and controls to prevent the U.S. economy to plunge into a vicious circle.
And it's not temporary measures, such as the recent partial nationalization of the automakers or major financial institutions, but permanent changes, leading to a heated debate between Democrats and Republicans.
The government wants to rebalance and the power and authority between the agencies responsible for regulating the banking, credit and investment, all of which play a role in the lives of everyday Americans through credit cards, mortgages or pension funds.
Based on the fact of obsolescence of existing rules for financial system has become incredibly complex and opaque, the administration will have to find the right balance between action ultimately ineffective and too timid a straitjacket that would hinder capitalism. "From a macroeconomic view, we are very supportive of reform," says Tim Ryan, CEO of the Securities Industry and Financial Markets Association (SIFMA), which represents the interests of securities firms, banks and managers assets.
The new organization will address the four main weaknesses identified in the current financial system.
- The absence of a federal entity capable of detecting the institutional tensions that threaten the financial system and the government's failure to intervene to help large institutions whose collapse would undermine the whole system. This entity already exists for banks, the Federal Deposit Insurance Corp.. Fund (Federal Deposit Insurance, FDIC);
- The under-capitalization of major financial institutions. When the crisis came, most banks had too much debt and not enough equity (capital);
- The emergence of large markets such as little-regulated investment funds at risk (hedge funds) and large insurers such as AIG, without federal oversight. The Obama administration is that the big private investment funds are registered with the Securities and Exchange Commission (SEC), Constable of the award, and is considering creating a federal charter for insurers;
- Consumers and lending institutions whose decisions reckless borrowing and credit were crumbling families in debt and contributed to the instability of the financial system. Barack Obama will probably recommend the creation of a protective device that can monitor for specific financial products than borrowing like mortgages and credit cards.
With regard to streamlining the number of regulatory agencies, banking, and insurance, Democrats and Republicans want the latter but at the same time would weaken the powers of the Federal Reserve (central bank) and the FDIC .
The administration has proposed a time to merge the SEC and the policeman of the commodities market, CFTC (Commodities Futures Trading Commission) but gave up before the political and legal difficulties of the operation.
Reforms may well anyway to make a winner: the Fed. The government and the president of the institution, Ben Bernanke, want the Central Bank becomes the regulator of "systemic risk" watch the financial system responsible for identifying gaps and tensions that could undermine it. At the time the responsibility for monetary policy and supervision of the largest financial institutions in the United States, if not the world, the Fed would gain an authority unmatched. The industry hopes the administration will propose to attend the Fed's board of controllers capable of detecting potential hazards.
Regarding the management of bankruptcies pose a risk to the entire financial system, the government wants to strengthen the role of the FDIC but leave the Fed and the Treasury's decision to involve the Fund. The Republicans meanwhile prefer that companies are restructured or liquidated by the bankruptcy court and do not trust government institutions to prevent or even anticipate crises.
To which the chief economic adviser of President Obama, Lawrence Summers, replied that can not ask the government to sign big checks to save financial institutions and they refuse to be supervised by the state. AP
source : latribune.fr
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