Obama to merge bank agencies in reform plan: source

By Kevin Drawbaugh
WASHINGTON (Reuters) - The Obama administration plans to merge two banking regulators and create a federal watchdog on consumer financial products as part of a sweeping reform plan to be formally unveiled on Wednesday.
The U.S. Office of Thrift Supervision will merge with the Office of the Comptroller of the Currency, both bank overseers, a congressional aide said, citing a briefing given by Treasury Department officials.
The administration has been discussing for six months how best to tighten bank and market regulation in response to the worst global financial crisis in generations. An OTS-OCC merger had been seen as likely to be included in its plan.
President Barack Obama will formally unveil the proposals on Wednesday. Treasury officials were giving briefings in both the Senate and the House of Representatives on Tuesday evening.
Obama pledged earlier on Tuesday in remarks at the White House that he would pursue major changes in financial oversight, but warned it will be a "heavy lift" politically with special interests already offering opposition.
A key element in the plan will be creating an independent Consumer Financial Protection Agency to write and enforce rules on fair lending and other matters.
The administration wants to accomplish a wide range of changes in regulation to try to prevent a recurrence of the crisis that has been hammering economies around the world.
Goals include closing gaps in regulation without shackling firms so tightly that they cannot support economic growth; forcing banks to hold more capital so they can better survive tough times, and bringing more transparency and accountability to financial markets that in recent years expanded far beyond the government's ability to keep track of them.
FED TO POLICE SYSTEMIC RISK
The administration wants to give the Federal Reserve new powers to police "systemic risk," in conjunction with a council of regulators, as a way to make sure that the failure of one important company does not destabilize the broader economy.
It also will propose empowering the government to seize and unwind large, troubled companies, and will seek to rein in markets for securitized debt and over-the-counter derivatives.
"There is going to be streamlining, consolidation ... so that you don't find people falling through the gaps," the president told reporters.
"Whether it's on the consumer protection side, the investor protection side, the systemic risks ... It's going to be a much more effectively integrated system than previously," he said.
Months of debate lie ahead. Congress has set more than a dozen hearings on financial reform between now and mid-July.
"We are going to put forward a very strong set of regulatory measures ... We expect that Congress will work swiftly to get these laws in place," Obama said. Continued...
Source: Reuters