June 16, 2009

This week, President Barack Obama is expected to propose a massive regulatory overhaul of the financial and banking industry.The proposal puts the Federal Reserve in the position of systemic regulator to manage the largest financial institutions. It also puts the government in control of breaking up systemically important institutions and calls for the creation of a consumer-oriented financial product regulator, unnamed sources told the Wall Street Journal.

The revamped regulation would mandate new rules of the financial industry on many fronts, from mortgage underwriting to the trading of exotic financial instruments, according to the WSJ.Reports last week indicated the overhaul proposal would see regulators take on broader authority, rather than the consolidation of several agencies into one, as reports had stated before. The proposal, slated to arrive as early as Wednesday, is already making waves in the industry as market players anticipate the largest reform since the policy responses to the Great Depression.