Treasury Secretary Henry Paulson is scheduled to announce a proposal to completely overhaul the regulation of the financial sector this morning. Among his key provisions are greatly enhanced oversight by the Federal Reserve and the elimination of the Securities and Exchange Commission as we know it.
The financial services sector has undergone many changes, and regulations have not kept pace. Change is needed, but the extent of the change required and modifications needed to make new regulations a reality is a point of great debate.
Paulson's proposal is a good starting point, but nothing more. There are simply too many vested interests to allow any real change to occur in the midst of a presidential election. Nonetheless, the discussion needs to start and Paulson should be lauded for trying to get people to think outside of the box.
Looking out into 2009 and beyond, any changes could have a significant impact on many companies, especially those that are reliant on mortgages. Bluntly put, the long-term projected rates for the likes of Washington Mutual (WM), PMI Group (PMI) and D.R. Horton (DHI) are now even more questionable than before. On the other hand, a wait and see approach is required for firms like CME Group (CME).
The biggest question, however, remains whether or not any true change will occur. The next president will have to deal with Iraq, health care, the budget and the environment. If the markets rebound, will overhauling the financial regulatory environment still be a high priority? That is not something that can be answered right now.
Read the full analyst report on WM.
Read the full analyst report on PMI.
Read the full analyst report on DHI.
Read the full analyst report on CME.
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