Last month, President Obama announced the administration’s sweeping plan for financial regulatory restructuring. This broad and ambitious plan is a reaction to what the President called a “culture of irresponsibility” that resulted in the financial crisis, and it would result in a significant reordering of financial regulatory agencies and substantially increased government supervision of the financial sector. Obama said that the existing regulatory structure had been “overwhelmed by the speed, scope and sophistication of a 21st century global economy.”

Final legislative passage will likely be a lengthy process. House Financial Services Chairman Barney Frank (D-MA) has already commenced the process of working on portions of the administration’s plan in the House. He has informed NTEU leaders that he expects the legislation to be on the House floor in September. The Senate Banking Committee is not expected to turn to this bill until after Labor Day.

Under the proposed plan, the SEC would remain intact and would not be merged with the CFTC as had previously been reported in the press. However, the embattled Office of Thrift Supervision would be eliminated and merged into the Office of the Comptroller of the Currency. The administration has also asked the SEC and CFTC to make recommendations to Congress for changes to statutes and regulations that would harmonize the two agencies’ regulation of securities and futures.

The SEC would be afforded expanded authority to promote transparency in investor disclosures. The agency would also be given new tools to increase fairness for investors by establishing a fiduciary duty for broker-dealers offering investment advice and by harmonizing the regulation of investment advisers and broker-dealers.

In addition, all advisers to hedge funds and other private pools of capital, including private equity funds and venture capital funds, whose assets under management exceed some modest threshold would be required to register with the SEC under the Investment Advisers Act. The advisers would be required to report information on the funds they manage that is sufficient to assess whether any fund poses a threat to financial stability.

The plan also proposes that all OTC derivatives markets, including CDS markets, would be subject to comprehensive regulation that addresses relevant public policy objectives such as preventing risk to the financial system, promoting efficiency and transparency in those markets, preventing market manipulation, fraud and other market abuses, and ensuring that OTC derivatives are not marketed inappropriately to unsophisticated parties. Such regulation would fall to the SEC and CFTC.

The plan also charges the SEC with increasing the transparency and standardization of securitization markets, and proposes to give the SEC clear authority to require robust reporting by issuers of asset backed securities. It also encourages the SEC to continue its efforts to strengthen the regulation of credit rating agencies, and to move forward with its plan to strengthen the regulatory framework around Money Market Mutual Funds to reduce credit and liquidity risk profile of individual MMFs and to make the MMF industry as a whole less susceptible to runs.

NTEU has regularly pushed for these expansions of the SEC’s regulatory authority on Capitol Hill over the past year.

The plan would also eliminate the SEC’s Supervised Investment Bank Holding Company program. Investment banking firms seeking consolidated supervision by a U.S. regulator would be subject to supervision and regulation by the Federal Reserve.

The President’s proposal also includes the creation of a Financial Services Oversight Council, along the lines of what NTEU Chapter Presidents from the SEC, OCC, FDIC and NCUA proposed to the Senate Banking Committee early this year, to work with the Federal Reserve to monitor systemic risk. The Council would facilitate information sharing and coordination, identify emerging risks, advise the Federal Reserve on identification of firms whose failure could pose a threat to financial stability due to their combination of size, leverage and interconnectedness, and provide a forum for resolving jurisdictional disputes between regulators. This Council would be comprised of the Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve System, the Director of the National Bank Supervisor, the Director of the Consumer Financial Protection Agency, the Chairman of the SEC, the Chairman of the CFTC, the Chairman of the FDIC and the Director of the FHFA.

In addition, the President’s plan also proposes the creation of a new Consumer Financial Protection Agency, which would cover consumer financial services and products such as credit, savings and payment products and related services, as well as the institutions that issue, provide or service these products. The new CFPA would reduce gaps in federal supervision and enforcement, improve coordination with the states, set higher standards for financial intermediaries, and promote consistent regulation of similar products. The plan does not include CFPA oversight of mutual funds – an idea that the Union has opposed given the SEC’s central role in investor protection.

“For many months now, NTEU leaders from the SEC, OCC, FDIC and NCUA have been working closely with agency leaders and meeting with key members of Congress to provide information about what we do and how we do it, and to make recommendations regarding appropriate regulatory changes and improvements,” Chapter 293 President Greg Gilman noted soon after the announcement of the administration’s plan. “The Union will continue to do its part to ensure that the SEC retains its substantial regulatory role as the investors’ protector as legislation makes its way through Congress this summer. Thank you to the dues paying members of NTEU who make it possible for SEC employees to have a voice in this process.”