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US Treasury Dept Outlines Platform for Reform

 

March 31, 2009. US Treasury Secretary Timothy Geithner outlined a framework for regulatory reform to address the lessons learned from the financial crisis. He said,

To address these failures will require comprehensive reform -- not modest repairs at the margin, but new rules of the road. The new rules must be simpler and more effectively enforced and produce a more stable system, that protects consumers and investors, that rewards innovation and that is able to adapt and evolve with changes in the financial market.

The key steps and his remarks:

  1. Address systemic risk. This crisis – and the cases of firms like Lehman Brothers and AIG – has made clear that certain large, interconnected firms and markets need to be under a more consistent and more conservative regulatory regime. It is not enough to address the potential insolvency of individual institutions – we must also ensure the stability of the system itself.

  2. Protect consumers and investors. It is crucial that when households make choices to invest their savings we have clear rules of the road that prevent manipulation and abuse. While outright fraud like that perpetrated by Bernie Madoff is already illegal, these cases highlight the need to strengthen enforcement and improve transparency for all investors. Lax regulation also left too many households exposed to deception and abuse when taking out home mortgage loans

  3. Eliminate gaps in our regulatory structure. Our regulatory structure must assign clear authority, resources, and accountability for each of its key functions.  We must not let turf wars or concerns about the shape of organizational charts prevent us from establishing a substantive system of regulation that meets the needs of the American people. 

  4. Foster International Coordination. To keep pace with increasingly global markets, we must ensure that international rules for financial regulation are consistent with the high standards we will be implementing in the United States.  Additionally, we will launch a new, three-pronged initiative to address prudential supervision, tax havens, and money laundering issues in weakly-regulated jurisdictions. 

 

Copyright © 2009 Center for Financial and Accounting Literacy

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Geithner's Plan