Paulson Wants a Consolidation of Power Among Securities Regulators

Most of the time, rules and regulations are only put in place after disaster strikes. After all, if it ain't broken, why fix it, giving yourself unnecessary hassle? But if a fiasco blows up and many people get burnt, that's when it catches the attention of politicians.

It was reported this weekend that U.S. Treasury Secretary Henry Paulson is proposing the creation of new regulatory agencies with broad powers over lending, the securities industry and business conduct, according to the draft of a study he commissioned in June. The proposal, which was circulated among government agencies this week, suggests the merging of the Securities and Exchange Commission [SEC] and the Commodity Futures Trading Commission [CFTC], both of which are embroiled in a power struggle. The SEC regulates investment banks, securities and stock exchanges, while the CFTC oversees about $4.2 trillion in daily turnover of products ranging from pork bellies to currencies.

The draft also recommends more power for the Federal Reserve. While a representative from the Treasury Department said the draft report "is not current", financial lobbying groups including the Securities Industry and Financial Markets Association, welcome the move.

Even though Citigroup upgraded investment bank Lehman Brothers (LEH) shares to a buy rating from the hold recommendation held by the firm since Sept. 13, 2003, it's shares dropped 2.17% Friday as options traders increased bearish bets. There were almost four times more put options traded (puts are options that give the right to sell Lehman shares at a given price) than calls (options to buy at a set price). Implied volatility, the main gauge of options prices, jumped to 102.84 from 88.22 on Friday, indicating traders anticipate bigger swings in the share price.

Disclosure: None

Comments

[gordon:]

This is Paulson's attempt to head-off any Congressional regulations, in fact, in the greatest conflict in US financial history, Paulson is actually trying to open the Fed up UNCONDITIONALLY TO ALL PRIMARY DEALERS, to DE-REGULATE, with no-limit loans! Tell the truth about what his intentions are! Do you dd on this, investigate a little.

2008 Mar 31 12:22 AM

[gordon:]

READ THIS before thinking Paulson isn't protecting his buddies, in the greatest conflict of interest in US financial history. Remember, he created the Enron off-balance sheet entities, just like CDOs, CLOs, SIVs, etc, and now he is going to fix this? www.truthout.org/docs_...

2008 Mar 31 12:32 AM