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Barack Obama Presses For Financial Overhaul
The most sweeping financial overhaul has been announced by President Obamaon 14 September 2009. This has come exactly after a year from the biggest bankruptcy in the history of American economy, that of Lehman Brothers. The failure of Lehman Brothers has been partly due to the over-borrowing done by ordinary Americans. As pointed out by him, the economic downturn is due to the failure of responsibility and to correct the situation, a serious and prudent financial reform is absolutely needed. The absence of financial regulations based on common sense has led to this situation where extraordinary intervention has become necessary.
According to Barack Obama, after the administration has infused a stimulus package of $787 billion, the economy is slowly pulling out of recession. But complacency must not set in and the businesses must not behave in their age-old manner after normalcy returns. They have to learn their lessons and ignoring the lessons will be perilous to the nation.
It has now been proposed to set up a new Consumer Financial Protection Agency to guard against deceptive credit card and mortgage loan practices. Systemic risks and loopholes will be reduced by strong rules and regulators will be given more authority. Large financial firms that pose such systemic risks will be strictly watched for their accountability and responsibility.
Federal Reserve will be fully accountable for regulating large and highly interconnected firms. An oversight council will be created to bring all the regulators together for the sake of sharing information, identifying gaps in regulation and tackling unique issues that do not fit into an organizational chart. Global demand will be spurred by addressing the underlying issues responsible for the recession and this needs strengthening of international cooperation. This appears to be the most ambitious financial overhaul after the Great Depression of the 1930's.