Neal Wolin
Deputy Secretary
U.S. Department of the Treasury
Speaking “on the cusp of a final Senate vote” that will send landmark financial regulatory reform legislation to the President, the Deputy Secretary of the U.S. Treasury stated the bill will fix “fundamental flaws” in the U.S. financial system and set “a clear path forward.”
Mr. Neal Wolin reiterated Treasury’s support of the bill, summarizing the key provisions that they believe will lay a foundation for more effective regulation and, in turn, a more stable financial system. Key provisions highlighted were 1) the ability to identify and manage systemic risk through the newly created Financial Stability Oversight Council (FSOC), who is expected to identify systemically important institutions soon after being formed; 2) the requirement for regulators to impose substantially stronger prudential standards, supplemented by mandatory stress-testing and the establishment of “living wills”; 3) the creation of a regulatory framework for derivatives markets, encompassing centralized clearing for standardized derivatives contracts; 4) a new resolution authority within the FDIC to wind down systemically important, failing institutions and therefore effectively end the problem of “too big to fail”; and 5) the creation of the Bureau of Consumer Financial Protection (CFPB) who, consolidating the authorities of seven different regulators into one independent entity within the Federal Reserve, is charged with promoting transparency and consumer protection.
Mr. Wolin made note of the Administration’s commitment to “making the financial system of the United States the most stable, the most trusted, and the most competitive financial system in the world.”
In regards to derivatives legislation, specifically as related to the Volcker Rule and the Lincoln amendment, Mr. Wolin described the core idea behind the legislation as being banks with access to the discount window should not be permitted to engage in any activities deemed to be risky or volatile. Other countries are also evaluating regulatory frameworks for derivatives – Japan recently announced their rulings and an announcement from the European Union is expected this September.
Of note, Mr. Wolin announced that the Government Sponsored Enterprises, Fannie Mae and Freddie Mac, require fundamental reform and that “early next year, we will put forward a paper outlining our proposals and recommendations.” It is hoped that this timeline will allow financial regulatory reform to be implemented quickly, as reform the housing finance system will require huge amounts of attention and resources.
When asked about executive compensation, Mr. Wolin said Treasury does not have any plans to introduce new legislation, and that the Federal Reserve and other regulators have put out “good, sensible guidelines.”
In closing, Mr. Wolin stated “reasonable people will disagree on some details... But like the securities laws of the 1930s, the Dodd-Frank legislation lays the foundation for a stronger, safer financial system – innovative, creative, competitive, globally leading, and far less prone to panic and collapse.”
To view the video, you will need Adobe Flash player. If you do not have Flash Player, please click here to download.
Other Regulatory Reform Highlights
SPEAKERS: |
|