This is the VOA Special English Economics Report.
On Wednesday, President Obama proposed major changes to rebuild government supervision of the financial industry.
|President Obama announces his plan at the White House|
The current economic downturn grew out of a culture of irresponsible lending and borrowing and "a failure of the entire system," he said. He says a new system is needed to meet the speed and complexity of a twenty-first century global economy.
Treasury Secretary Tim Geithner says the financial crisis developed in part because the existing system let some companies "shop for the weakest regulator." He discussed the plan before the Senate Banking Committee on Thursday.
One goal is to increase supervision of big companies whose failure could threaten the financial system. The Federal Reserve would gain new powers. The central bank would work with a proposed Financial Services Oversight Council to decide which companies are too big to fail.
The idea is to identify troubled companies early. But the Fed would now have to seek permission from the Treasury to carry out emergency lending.
The administration also proposes a new Consumer Financial Protection Agency. It would be responsible for protecting people from unfair and abusive practices with borrowing and investing.
The administration also supports another proposal. Lenders would have to keep five percent of the home loans they would normally group together to sell as securities. The idea is that lenders will be more responsible in making loans if they might not be able to pass off risky mortgages to investors.
Democratic leaders in Congress say they hope to pass a bill for the president to sign by the end of the year.
Some groups were dissatisfied with the proposals. Insurance companies hoping for simplified rules will continue to deal with different supervisors in every state. And there is almost no effort to combine the numerous federal regulatory agencies into a single financial regulator.
An industry group, the Financial Services Roundtable, says it supports many of the administration's proposals -- but not for a consumer protection agency. It opposes separating the regulation of a company from its products, saying each regulator will only have half the information. The industry "does not necessarily need more regulation," it says," but rather more effective regulation."
And that's the VOA Special English Economics Report, written by Mario Ritter. I'm Steve Ember.