Partisanship Poses Systemic Risk

Before Tim Geithner could get out even the first installment of his legislative masterwork, Congressional Republicans beat him to the punch by unveiling an all-in-one regulatory reform proposal called the Financial System Stablization and Reform Act of 2009 (FSSRA). On the 23rd, Susan Collins introduced FSSRA in the Senate (S. 664) and three days later, Mike Castle introduced it in the House (HR 1754).

The Council

FSSRA does a whole bunch of stuff, but the majority of the bill is devoted to creating the Financial Stability Council - a "systemic risk monitor for the financial system of the United States". The Council would be composed of the Secretary of the Treasury and the chairs of the Board of the Federal Reserve, the FDIC, the National Credit Union Administration, the SEC and the CFTC, and headed by a Chairperson appointed by the President.

The Council would review all regulatory actions from a slew of agencies with financial-system related oversight. It would also: oversee systemic risk policy (including capital and solvency requirements), consult with foreign regulators, and review "new financial instruments".

Other

FSSRA also:
* gives the CFTC the power to regulate credit default swaps,
* forces investment bank holding companies reorganize under the Bank Holding Company Act (wait, who are we talking about here?),
* directs the SEC to finalize rules designating central CDS clearinghouses, and
* abolishes the Office of Thrift Supervision (its duties get transferred to the Office of the Comptroller of the Currency).