Client Alert: Treasury Blueprint for Regulatory Reform

On March 31, 2008, Treasury Secretary Henry Paulson unveiled a Blueprint for a Modernized Financial Regulatory Structure. The document reflects the comments received in response to the advance notice of proposed rulemaking issued in the fall of 2007 soliciting input on a wide range of structural and substantive issues involving the current and optimal organization of the financial services regulators. Further, the document reflects suggested changes to the structure of the regulatory agencies as a result of the problems in the mortgage market and investment banking industry in the past nine months. A final impetus to the study was the desire by Treasury and the Administration to address the global competitiveness of the US financial markets.

The Blueprint contains recommended actions that can be accomplished in the short term and additional recommendations for longer term action. The recommendations for short term actions respond to the current market situation and specially address concerns about the mortgage market and the ongoing liquidity functions of the Federal Reserve. The medium and long term recommendations address possible structural and organizational changes to the financial services regulatory scheme as it currently exists.

The following are some of the highlights of the Blueprint.

Short Term Recommendations

• Adoption of consistent national standards and enforcement for mortgage originators. The establishment of a Mortgage Origination Commission, a federal commission that would develop uniform minimum qualifications for state mortgage market participant licensing (including mortgage brokers) is recommended. Treasury also recommends that state agencies be given clear authority to enforce compliance with the Truth in Lending Act and that the Federal Reserve retain the authority to promulgate regulations implementing national mortgage lending laws. more...