U.S. to Toughen Finance Rules
By DAMIAN PALETTA
The Obama administration, moving with increasing speed, has inked the main contours of its plan to revamp financial-market oversight -- changes that will ripple through the economy, affecting everything from the operations of international banks to consumer protection.
The principles include giving the Federal Reserve new powers that include authority to monitor and address broad risks across the economy, say people familiar with the matter. The proposals are expected to include tougher capital requirements for big banks and authority for regulators to take over a large financial firm that is failing.
A major component of the plan would be new clout for the Federal Reserve, which already runs monetary policy and has accumulated large new powers since the financial crisis began.
The balkanized structure of financial-services regulation has meant that no one institution had the ability to look broadly at markets to spot signs of systemic risk, such as huge bets made by investment banks on mortgage debt.
Mr. Geithner wants the Fed to have the authority to do so.
At the same time, the Treasury hopes to define the Fed's new powers clearly, so as not to create the expectation it would rush in to solve every problem. The new powers are likely to include some kind of oversight of extremely large hedge funds.
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