Being touted as the biggest regulatory overhaul since the Great Depression, President Obama will announce specifics today of his “new foundation” for the financial industry.   The five primary elements of the administration’s plan for regulatory reform are: 

1. Promote Robust Supervision and Regulation of Financial Firms: Tougher oversight of financial institutions through expansion of the role and increasing the powers of the Federal Reserve by giving it greater oversight over financial institutions such as banks and insurance companies.  
2. Establish Comprehensive Regulation of Financial Markets: Increased focus on market infrastructure by regulating previously less regulated  products such as over-the-counter derivatives.  For example, the administration will propose regulations requiring originators of new securities to have “skin in the game” by requiring that such originators hold a continued equity stake in the securities even after the securities are largely sold off. 
3. Protect Consumers and Investors from Financial Abuse: Creating the Consumer Financial Protection Agency (CFPA) which will be a regulatory agency responsible for protecting consumers who have credit cards, mortgages, or other financial products and will serve as a consumer watchdog.  According to a senior administration official, the new agency will establish “a very clear line of accountability around products that they deem abusive of consumers, or misleading.”  The new Agency will also have the authority to “reform our mortgage laws.”  One such law will require that “consumers receive a single, simple, integrated federal mortgage disclosure.” 
4. Provide the Government with Tools it needs to Manage Financial Crisis:  Giving the administration greater power to dismantle financial firms falling into financial difficulties so as to preempt the kind of systemic problems suffered in the current economic meltdown. 
5. Raise International Regulatory Standards and Improve International Cooperation:  Coordination of financial regulation with governments around the globe so as to synchronize global oversight of financial markets.

“The goal is to integrate the system, make sure that there are not any gaps, and to make sure that we have a updating of the regulatory system that worked back in the 1930s, but doesn’t work with the kinds of financial instruments and the kinds of global capital markets that exist today…..and we’re confident that we’ve struck the right balance.”   -President Obama, Bloomberg Television. 

See the full and official 85-page white paper of regulatory plan here.

UPDATE:  The President’s remarks

12:53 P.M. EDT

THE PRESIDENT: Thank you very much.

Since taking office, my administration has mounted what I think has to be acknowledged as an extraordinary response to a historic economic crisis. But even as we take decisive action to repair the damage to our economy, we’re working hard to build a new foundation for sustained economic growth. This will not be easy. We know that this recession is not the result of one failure, but of many. And many of the toughest challenges we face are the product of a cascade of mistakes and missed opportunities which took place over the course of decades.

That’s why, as part of this new foundation, we’re seeking to build an energy economy that creates new jobs and new businesses to free us from our dependence on foreign oil. We want to foster an education system that instills in each generation the capacity to turn ideas into innovations, and innovations into industries and jobs. And as I discussed on Monday at the American Medical Association, we want to reform our health care system so that we can remain healthy and competitive.  Read the rest of this entry »

The credit card companies are already retaliating against the Credit Card Bill of Rights that passed through the Senate yesterday.  The industry has decided to go after their best customers in two ways.  First, by charging an annual fee to consumers and second by charging interest on purchases as soon as the purchase is made rather than giving the industry standard grace period.  Well the Obama administration and Congress is firing back.  The White House is actively discussing adding a new regulatory commission that regulates the credit card industry.  This would be part of the major overhaul of the financial industry that the administration has in the works.  The new commission would have broad authority to protect consumers who use mortgages, credit cards, and mutual funds.  In addition, the proposed commission’s authority would be concentrated in one place with consumer protection as one of its main priorities.  This no doubt will result in tougher rules for the financial industry generally and the credit card industry specifically.

Some of the new requirements are:

• Payment summary must show length of time it will take you to pay off your credit card bill if only the minimum payment is paid each month.  The payment summary must also include how much interest you will pay over time if only the minimum payment is made.
• Credit card bill must be sent out 21 days before payment due date
• Credit card companies cannot retroactively change the rate on existing balances unless the card is 60 days delinquent
• Consumer payments above the minimum payment applies first to balance with highest rate
• Teaser rates cannot be changed for the first year that the account is opened and promotional rates must last at least six months
• Over limit fees cannot be charged unless consumer has expressly authorized such transactions beforehand
• Minors under the age of 21 must provide consent of a parent that they will be liable for the debt or prove to the credit card company that the under 21 consumer has the means to repay the debt. 

The Obama administration and Congress hopes that this regulation will help to deter consumers from over leveraging themselves in addition to protecting consumers from predatory practices.