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Obama wants insurance, hedge, derivative, p.e. power

How Obama plan would extend federal control of hedge funds, private equity, derivatives and insurance

Blank Rome LP has published a quick, useful summary of Obama's 85-page bank regulation reform plan, here. Highlights (new stuff) include:

- "Robust reporting requirements on issuers of asset-backed securities"

- "Subject all derivatives trading to regulation; strengthen oversight of systemically important payment, clearing and settlements systems."

- "While enhancing the Fed's power (as systemic regulator), the President proposes to diminish their autonomy to some degree by requiring them to seek permission from Treasury to use their emergency lending authority and by removing from their jurisdiction the mandate to protect the consumer from risky products and practices. This modulated approach to the Fed's powers will be received well by Members of both parties on Capitol Hill who have expressed some concerns, for a variety of reasons, with the accretion of power by the Fed during this crisis."

-"The plan's reach into the insurance industry is also worthy of note. By setting up a new national insurance office in the Treasury, the plan would put in place an infrastructure that some might see as the stalking horse for outright federal regulation of the industry," for example by the Federal Reserve.

"While this proposal leaves intact the state regulatory structure for the insurance industry, it is sure to induce the industry and some on Capitol Hill to seek to attach the optional federal charter concept to the legislation required to implement the Obama plan.

"Significant Capitol Hill activity can also be expected surrounding the proposals to regulate hedge funds and private equity firms. These firms have been working hard to avoid federal regulation in recent years, but the momentum is now very strong for that to occur. So we expect a battle over the extent of the regulation."