Obama calls for new regulations on US financial system

President Obama revealed plans to significantly change regulation over America´s financial system on Wednesday. In a White House speech, Obama called for tougher government regulations on large financial institutions.  He also called for greater coordination between America´s numerous financial regulators.  

Obama spoke about the current situation, saying that one of the most significant contributors to the economic downturn was  “an unraveling of major financial institutions” and a failure by regulators to “prevent abuse and excess.”

One proposal that is expected to generate debate, is the creation of a consumer financial protection agency, an entity that would regulate financial products like credit cards and mortgages.  Obama also wants to increase the Fed´s powers to oversee financial institutions like insurance companies, whose failure poses a great risk to the economy.

Banks would also be required to hold a minimum amount of capital in their accounts, and products that have gone unregulated until now, like hedge funds, would be brought under government oversight.

Conservatives and financial interest groups are expected to oppose these reforms, arguing they could stifle the market´s potential for growth.  Obama tried to seek some common ground with his critics, saying he has “always been a strong believer in the power of the free market” and adding that markets will continue to be “the engine of America´s progress.”

The president said his reforms would mitigate reckless lending and irresponsible borrowing.  His blueprint for financial regulation will now go to Congress and the administration hopes to have the reforms approved later this year.