Paulson Wants Quicker Regulatory Overhaul

The Treasury secretary said the collapse of Bear Stearns and related market chaos have made changes necessary sooner than he envisioned when he first outlined the plan in March.
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Treasury Secretary Henry Paulson on Thursday stressed the need for speed in efforts to overhaul the oversight framework for the financial system.

In March Paulson

first unveiled

plans that would instill in the

Federal Reserve

broad new powers to oversee market stability. The "market turmoil" following the near collapse of Bear Stearns and the central bank's role in aiding a sale to

JPMorgan Chase

(JPM) - Get Report

, however, have made it evident the plans must proceed quicker.

"When we published the blueprint in March, I made clear I believed we were laying out a long-term vision that would take time to consider and implement," Paulson said at a meeting of Women in Housing and Finance in Washington, D.C. "Since then, the Bear Stearns episode and market turmoil more generally have placed in stark relief the outdated nature of our financial regulatory system."

Paulson said Treasury is working with the Fed and the

Securities and Exchange Commission

on issues related to the central bank's decision -- made amid the rocky market at the time of Bear's crisis -- to make credit available to primary dealers such as

Goldman Sachs

(GS) - Get Report

,

Lehman Brothers

(LEH)

and

Morgan Stanley

(MS) - Get Report

.

"

We must dramatically expand our attention to the fundamental needs of our system, and move much more quickly to update our regulatory structure -- always keeping in mind that there must be a balance between market discipline and market oversight," Paulson said.

The plan calls for "stronger oversight" of the mortgage market, including national licensing standards for brokers and increased disclosure from securitizers and ratings agencies. It also pushes credit rating agencies to provider better information to allow investors to make informed decisions about risk and calls for an industry cooperative to regulate products like credit default swaps, which now fall largely outside the realm of regulatory oversight.

"In our blueprint, we suggested an optimal regulatory structure for the long term in which the Federal Reserve would take on a different but important role as market stability regulator focused exclusively on the market as a whole," Paulson said.

This article was written by a staff member of TheStreet.com.