Thinking Money | Free Financial Advice and Tips

US to implement tighter financial regulations

Posted on 07. Jul, 2009 in Credit cards, General News

The US government is preparing to launch a massive financial reform to avoid future financial crises. The Obama administration says that the current system of regulation leaves too many legal gaps on the bases on old-fashioned notions of fiscal risk.

The reform proposes greater state regulation of the major financial institutions and new guidelines for consumer and shareholder protection. The government plans to establish a board of regulators with greater co-coordinating powers across the system.

The objective of the reforms is to reassure Americans that the financial system is being properly controlled – this it believes is crucial to the success of its overall goal of economic recovery.

The reform

The proposals include giving the government the power to control major institutions through a systematic procedure if the failure of such establishments could cause a national financial stress. A number of financial regulators considered inefficient have been abolished as part of this process.

Possible Opposition

Some Congressional leaders are likely question the rationale behind bailing out big businesses and would demand assurances from those businesses in return.

Other reforms

The Obama administration is also committed to creating a new consumer regulator to oversee credit cards and mortgages. Credit card companies would be keen on making an input to this particular process.

It is hoped that the new reforms will lead to deep-seated changes in the performance of banks.