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: Jim Hamilton's World of Securities Regulation

By Jim Hamilton

Financial Oversight Chairs Pledge to Work Together to Produce Reform Legislation by Year End

In a letter to President Obama, Senator Christopher Dodd and Rep. Barney Frank pledged to work together in a bicameral and bipartisan effort to pass legislation reforming the regulation of the nation?s financial markets by the end of the year. Senator Dodd is Chair of the Banking Committee, and Rep. Frank is Chair of the Financial Services Committee. The oversight Chairs said that they would work expeditiously, carefully and deliberately to create a framework for 21st century regulation that will enhance financial stability and protect consumers and investors.
The legislators said that they agree with the Administration?s core principles for modernizing financial regulation as recently articulated by Treasury Secretary Tim Geithner, including providing for systemic risk regulation, strengthening consumer and investor protection, streamlining prudential supervision, and addressing regulatory gaps, such as with hedge funds and other private pools of capital. In drafting legislation, the leaders will also be guided by the principles of openness, transparency, and plain language.

As part of the reform, the Chairs will draft legislation comprehensively reforming corporate governance and executive compensation at financial institutions. They promised to work with the Administration to ensure a new corporate governance framework focused on strict accountability and the promotion of long-term value. One of the most consistent criticisms of current executive compensation is that it favors short-term performance and contributes to excessive risk taking.

While recognizing that the adoption of regulatory rules is a sovereign decision, the chairs want to prevent regulatory arbitrage; and so they will consult closely with other major cross-border financial centers in an effort to coordinate legislation.

Full post as published by Jim Hamilton's World of Securities Regulation on March 30, 2009 (boomark / email).