On June 17, 2009 President Obama's speech, and a concurrently released white paper, clarified his administration's plans to prevent future financial crises by modifying key aspects of US law regulating commercial banks, insurance companies, securities firms and other major players in the US financial services industry. That speech, which followed several months of hearings by various committees and subcommittees of the US Congress and wide-ranging consultation with most concerned constituencies, was preceded by statements by Secretary of the Treasury Timothy Geithner and Director of the National Economic Council and Assistant to the President for Economic Policy Lawrence Summers. The Republican Congressional delegation also released an outline of a plan of its own in June. This effort is not a part of the recent Federal Reserve emergency financing programs and economic stimulus measures directed at rescuing and stimulating the US economy, but an effort to modernize and reform the federal government's regulation of the US financial services industry. A plan this comprehensive was last seen in the review and legislation that resulted in the Federal Deposit Insurance Corporation (FDIC) and the separation of commercial banking from investment banking following the onset of the Great Depression of the 1930s.
President Obama first pointed out that, among the "cascade" of mistakes, failures and missed opportunities contributing to the current economic downturn, one of the most significant was a "lack of regulatory structures to prevent abuse and excess." Citing a combination of a "culture of irresponsibility...from Wall Street to Washington to Main Street," sophisticated 21st century product developments leaving 20th century financial regulation in the dust and executive compensation "unmoored from long performance or even reality," he announced "a sweeping overhaul of the financial regulatory system."
To assist Squire Sanders' clients and our friends with tracking and influencing this process, below we identify the topics and issues that we believe have the greatest likelihood of being included in the final legislation. Final legislation will in some instances provide for the creation of new government agencies and agency rulemaking, processes that would allow for agency, industry and public input to the final rules and add many months or years before significant changes in the regulations are adopted. We have assembled an overview of the issues of timing and substance as well as what we expect to see in any final legislation. Read our PDF overview of the Obama Administration's proposed modernization, re-regulation and reform.