The Secretary’s New Rules

March 26th, 2009 - 2 Comments

On Capitol Hill today, Treasury Secretary Timothy Geithner outlined changes he’s proposing that would grant the federal government greater oversight and regulatory power over the country’s financial system. The Treasury proposal would extend federal trading regulations to derivatives and would bring hedge funds under the regulatory oversight of the Securities and Exchange Commission.

Additionally, Geithner calls for tougher standards for judging whether financial institutions are too big to fail, and he proposes a new federal agency that would monitor risk.

Smeal’s John Liechty suggested similar changes to the country’s financial system in an article in yesterday’s American Banker. Liechty and co-author Allan Mendelowitz of the Federal Housing Finance Board argue for the establishment of a National Institute of Finance (NIF) that “would serve as a national data archive and think tank for the financial regulatory community.”

“A centerpiece of the NIF would be a Federal Finance Data Center,” they write. “The center would let regulators assess system-wide contagion and concentration risks, perform stress tests, including the impact of the failure of a large institution, and hence make better-informed decisions in times of crisis.”

Liechty and Mendelowitz conclude: “Without detailed data and validated decision tools, crisis decisions will continue to be based on guesswork and intuition.”

View an early version of their op-ed on Liechty’s Web site.

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2 Responses to “The Secretary’s New Rules”

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