BREAKING NEWS
March 31, 2008
Paulson Plan Begins Battle Over How to Police Market
Amid Crisis, a Bid To Shuffle Powers
In a sweeping proposal circulated over the weekend, Treasury Secretary Henry Paulson slaughtered a number of Washington's sacred cows, proposing to merge or eliminate institutions of long standing including the Securities and Exchange Commission, and to create a controversial new role of supercop for the Federal Reserve.

In an interview, Mr. Paulson said the regulatory system is broken, a growing sentiment in recent months in Washington as each of the nation's financial watchdogs failed in a different way to prevent the foreclosure crisis and credit-market turmoil from spreading. "We need regulation, but if we have it, it should be just structured in a way that it has some way of being more effective," he said. "Everywhere I look, I see the plumbing hasn't changed to meet the realities."

Big crises, from the Panic of 1907 to the Great Depression to the 1987 stock-market crash, tend to give impetus to perennial efforts to reform U.S. financial oversight. The current system has developed over more than a century, and critics have long complained that too many agencies have overlapping jurisdictions and leave too many areas exposed.

Even if only parts of the Treasury plan see the light of day, they could reshape how the government interacts with Wall Street banks, Main Street banks, insurance companies, hedge funds and other institutions that grease the wheels of the nation's economy. While the Fed would gain power, the Securities and Exchange Commission could lose some or even all of its authority. Regulators at the federal level would significantly increase their clout at the expense of state regulators.
The Wall Street Journal