The U.S. Treasury Department has released its outline for an improved financial regulatory structure, one that Secretary Henry M. Paulson Jr. says will strengthen consumer protections, improve tools for market stability and enhance financial innovation. The Blueprint for a Modernized Financial Regulatory Structure includes a series of short-, intermediate- and long-term recommendations for reform of the U.S. regulatory structure, and its purpose, Paulson notes, is to ‘evolve to a more flexible, efficient and effective regulatory framework.’
The short-term recommendations include improvements to regulatory coordination and oversight that regulators can make quickly. The Blueprint recommends creating a new federal commission for mortgage origination to protect consumers better. The report also recommends modernizing the President's Working Group on Financial Markets and clarifying the Federal Reserve's liquidity provisioning.
Intermediate-term recommendations focus on eliminating some of the duplication in the existing regulatory system. The report calls for modernization the regulatory structure for certain financial services sectors, and recommendations include eliminating the thrift charter, creating an optional federal charter for insurance and unifying oversight for futures and securities.
The long-term recommendation is to create an entirely new regulatory structure using an objectives-based approach for optimal regulation. The structure will consist of a market stability regulator, a prudential regulator and a business conduct regulator with a focus on consumer protection.
A press statement announcing the Blueprint recommendations notes that modernization is ‘inevitable,’ and says the ‘antiquated’ regulatory structure is insufficient for the current capital markets and financial services industry. In response to the Treasury's report, Mortgage Bankers Association (MBA) Chairman Kieran P. Quinn says the ‘MBA believes we absolutely must have modern, world-class regulation of our financial system, and we appreciate Secretary Paulson's leadership on this issue.’
Calling the increase of inconsistent state regulations ‘one of the most signficant problems for the mortgage industry and its customers,’ Quinn adds the MBA supports enactment of a uniform lending standard as well simplification of disclosures to make the mortgage process more transparent.
‘This requires reform under the Real Estate Settlement Procedures Act (RESPA) to simplify disclosures to consumers – including disclosures from mortgage brokers about whether they are acting as the borrower's agent,’ Quinn says. ‘MBA believes that national reforms along these lines, which would preempt inconsistent state and local laws, would be far better for consumers than inconsistent regulation.’
For more information, visit www.treas.gov/offices/domestic-finance/regulatory-blueprint/.