financial regulatory reform

In the wake of the events of the last two years, all of us involved in regulating the financial markets must take a hard and honest look at our programs and approaches, and search for ways to more effectively uncover misconduct and enhance investor protection.

First, legislative change is needed to ensure that systemically important financial firms are subject to effective consolidated supervision, whether or not the firm owns a bank. Second, an oversight council made up of the agencies involved in financial supervision and regulation should be established, with a mandate to monitor and identify emerging risks to financial stability across the entire financial system, to identify regulatory gaps, and to coordinate the agencies’ responses to potential systemic risks.

Stripped of its complexities, the purpose of a financial system is to let those who want to save—whether for vacation, retirement or a rainy day—save. It is to let those who want to borrow—whether to buy a house or build a business--borrow. And it is to use our banks and other financial institutions to bring savers’ funds and borrowers’ needs together and carefully manage the risks involved in transfers between them.