In an effort to deal with the problems highlighted by the current severe credit crisis, the new plan would give major new powers to the Federal Reserve, according to a 22-page executive summary obtained by The Associated Press.
The proposal would designate the Fed as the primary regulator of market stability, greatly expanding the central bank's ability to examine not just commercial banks but all segments of the financial services industry.
The administration proposal, which is to be formally unveiled in a speech on Monday by US treasury secretary Henry Paulson, also proposes consolidating the current scheme of bank regulation.
The plan would shut down the office of thrift supervision, which supervises thrift institutions, and transfer its functions to the office of the comptroller of the currency, which regulates banks. The plan would eliminate the distinction between banks and thrift institutions. The role the
Federal Reserve has been playing in efforts to stabilise the financial system after a credit crisis hit last August would be formalised.
The Fed would become the governments market stability regulator, given sweeping powers to gather information on a wide range of institutions so that Fed chairman Ben Bernanke and his colleagues could better detect where threats to the system might be hiding. The proposal is certain to generate intense scrutiny in the Congress and within the financial services industry, where past efforts to change how regulation is handled have met with fierce resistance.