Obama to axe bank agency in US financial overhaul

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(Agencies)
Updated: 2009-06-17 10:11

The administration wants to give the Fed new powers to police systemic risk as a way to make sure that the failure of one large company - like bailed-out mega-insurer American International Group, for instance - does not destabilize the broader economy.

It also will propose empowering the government to seize and unwind large, troubled companies. Part of the proposal would require large, "Tier One" companies to maintain contingency plans for their unwinding in case of future trouble.

The administration will also seek to rein in markets for securitized debt and over-the-counter derivatives, as well as more regulation of money market mutual funds, credit rating agencies and hedge funds.

It will push for changes in corporate governance that could give shareholders more power to restrain executive compensation, as well.

"We are going to put forward a very strong set of regulatory measures ... We expect that Congress will work swiftly to get these laws in place," Obama said.

"But it is going to be as usual, a heavy lift ... You'll hear a lot of chatter about 'We don't need more regulation' and 'government needs to get off our backs,'" Obama added.

"There is a short memory, unfortunately, and I think that's what some of the special interests and lobbyists are going to be counting on, that somehow we've forgotten the disaster that arose out of their reckless behavior. And I'm going to keep on reminding them so we make sure that we get something in place that prevents this kind of situation from happening again."

House Democratic leader Steny Hoyer said on Tuesday that the House will deal with financial regulation reform in late July or soon after Congress' August recess. The outlook in the Senate, which moves more slowly, was unclear.

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