The Old Rules

IDD Magazine (04/07/08); Rozens, Aleksandrs; Granahan, Tom
Contrary to popular belief, a recent proposal to revamp regulation of the financial markets by Treasury Secretary Henry Paulson was not triggered by the need to help consumers and homeowners struggling with debt right now. According to Harvard University Joint Center for Housing Studies director Nic Retsinas, "This is not a rabbit pulled out of a hat to deal with today's credit choke hold. The root cause had to do with issues of overbuilding and liberal lending, and we lost this notion that people should borrow what they can afford to pay back." The new Treasury report actually bases its recommendations on a March 2007 conference focused on enhanced competition in the capital markets; and it calls for such reforms as modernizing the President's Working Group to communicate financial policy, establishing a Mortgage Origination Commission to assess state licensing and regulation and eliminating the thrift charter. Observers say the Treasury aims to give more power to the Federal Reserve to maintain market stability and retain the authority of the Securities and Exchange Commission as corporate financial regulator. They add that the plan will not be implemented in the near term due to its complexity and challenges from various industry players.