[JURIST] US President Barack Obama [official website] stressed the need for stronger financial industry regulations [press release] Monday in a speech [transcript] marking the one-year anniversary of the collapse of Lehman Brothers Holdings. Obama warned that signs the economy is beginning to turn around should not cause Wall Street to forget the lessons of the past year, saying "[n]ormalcy cannot lead to complacency." Obama went on to lay out his plans for "the most ambitious overhaul of the financial regulatory system since the Great Depression":
First, we're proposing new rules to protect consumers and a new Consumer Financial Protection Agency to enforce those rules. This crisis was not just the result of decisions made by the mightiest of financial firms. It was also the result of decisions made by ordinary Americans to open credit cards and take on mortgages. And while there were many who took out loans they knew they couldn't afford, there were also millions of Americans who signed contracts they didn't fully understand offered by lenders who didn't always tell the truth. ...Obama spoke at Federal Hall in New York City to an audience [press release] comprising mainly Wall Street representatives as well as several members of Congress and the president's economic recovery advisory board.
Second, we've got to close the loopholes that were at the heart of the crisis. Where there were gaps in the rules, regulators lacked the authority to take action. Where there were overlaps, regulators often lacked accountability for inaction. These weaknesses in oversight engendered systematic, and systemic, abuse. ...
Finally, we need to close the gaps that exist not just within this country but among countries. The United States is leading a coordinated response to promote recovery and to restore prosperity among both the world's largest economies and the world's fastest growing economies. At a summit in London in April, leaders agreed to work together in an unprecedented way to spur global demand but also to address the underlying problems that caused such a deep and lasting global recession. And this work will continue next week in Pittsburgh when I convene the G20, which has proven to be an effective forum for coordinating policies among key developed and emerging economies and one that I see taking on an important role in the future.
In July, the Obama administration sent Congress [JURIST report] draft legislation [press release and materials] that would put the Federal Reserve [official website] in charge of regulating the largest financial firms. The proposed legislation would create an eight-member Financial Services Oversight Council to pinpoint risks in financial markets and would establish a National Bank Supervisor and Resolution Authority. It would also create within the Department of the Treasury [official website] an Office of National Insurance, the director of which would be charged with identifying gaps in industry regulation that could lead to crises in the insurance or financial systems. The draft legislation would also amend the Bank Holding Company Act of 1956 [text] to give the Federal Reserve more power to regulate investment companies or advisors registered with the Securities and Exchange Commission [official website] under the Investment Company Act of 1940 [text]. Also in July, US financial regulators and scholars advised [JURIST report] the Senate Banking Committee [official website] that "safety and soundness" can be restored to the financial system through increased regulatory oversight, but did not agree on the form that oversight should take.