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US reform targets problem areas

SENIOR Obama administration officials yesterday said in a newspaper op-ed piece that a landmark financial regulation reform plan to be released this week will target capital requirements, securitization and other problem areas blamed for the global financial crisis.

In the most complete summary of the plan seen in some time, United States Treasury Secretary Timothy Geithner and National Economic Council Chairman Lawrence Summers said the plan would offer "a stronger framework for consumer and investor protection."

The piece was published in The Washington Post days ahead of the expected release tomorrow of a package of administration proposals.

One proposal, said Geithner and Summers, will be "raising capital and liquidity requirements for all institutions, with more stringent requirements for the largest and most interconnected firms."

Large and interconnected firms whose failure could threaten the stability of the system "will be subject to consolidated supervision by the Federal Reserve, and we will establish a council of regulators with broader coordinating responsibility across the financial system."

New reporting requirements will be urged for issuers of asset-backed securities, as well as a rule saying securitizers must "retain a financial interest" in the performance of the asset-backed securities they issue, they said.

Less reliance on credit-rating agencies will also be proposed, said the piece.


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