Don't ask, don't tell

28 October 2009 By Martin Hutchinson

The US Treasury s draft financial services law provides for a new class of systemically important banks which the Fed regulates more tightly and supports financially. That list should be public, not undisclosed as proposed, and the toobigtofail playing field needs to be level.

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The US Treasury on October 27 produced its discussion draft of proposed financial services regulation reform legislation. The draft sets up a Financial Services Oversight Council of the main regulators, which will have the power to identify systemically important banks, financial institutions and other companies doing financial business, with the list of such banks remaining undisclosed. The Federal Reserve would then have the power to impose tighter restrictions on identified banks, including making them sell off or close down risky activities.

The draft also provides for lenders to retain a portion of securitised assets, abolishes the Office of Thrift Supervision and provides enhanced authority to take over and wind down banks and other financial firms that are too big to fail.

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