Obama unveils financial reg reforms

WASHINGTON, June 17 (UPI) -- Sweeping changes to modernize the U.S. financial regulatory system and help prevent a repeat of the current financial crisis were outlined by President Obama.

"We know that this recession is not the result of one failure, but many," Obama said. "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."

Among other things, Obama proposed:

-- Reforms to require regulators "to look not only at the safety and soundness of individual institutions, but also ... at the stability of the system as a whole."

-- The Federal Reserve be granted new authority and accountability for regulating bank holding companies and other non-bank firms posing a risk to the entire U.S. economy should they fail.

-- A series of changes designed to promote free and fair markets by closing gaps and overlaps in the regulatory system "that exist not just within but between nations."

-- Creation of a new agency, the Consumer Financial Protection Agency, to focus on protecting consumers in credit, savings, and payment markets.

-- Dismantling the Office of Thrift Supervision and close loopholes "that have allowed important institutions to cherry-pick among banking rules."

-- Requiring hedge fund advisers to register with the Security and Exchange Commission.

-- Requiring that the originator of a loan retain an economic interest in the loan so the lender also has an interest in ensuring its repayment.

-- Coordinating worldwide regulation.

"It is an indisputable fact that one of the most significant contributors to our economic downturn was an unraveling of major financial institutions and the lack of adequate regulatory structures to prevent abuse and excess. An absence of oversight engendered systematic, and systemic, abuse," Obama said. "(Our) goal (is) to restore markets in which we reward hard work and responsibility, not recklessness and greed ... ."

He noted the reforms have been criticized as not going far enough and of going too far.

"We seek to create a framework in which markets can function freely and fairly, without the fragility in which normal business cycles bring the risk of financial collapse; a system that works for businesses and consumers," he said. "I'm convinced that by setting out clear rules of the road and ensuring transparency and fair dealings, we will actually promote a more vibrant market."