In remarks made at yesterday's press conference to announce the nomination of Mary Schapiro as Chairwoman of the Securities and Exchange Commission (SEC), of Gary Gensler as Chairman of the Commodity Futures Trading Commission (CFTC) and of Daniel Tarullo to the Federal Reserve Board of Governors, President-elect Obama indicated that updating the nation's financial regulatory system will be one of the top legislative priorities of his new administration. While the details of President-elect Obama’s plans are not yet clear, his early identification of his financial team, coupled with a willingness to identify regulatory reform as a high priority of his upcoming administration, appears to indicate an intention to begin a deep review of the overall financial regulatory landscape. In addition, his remarks (some of which are highlighted below) seem to signal a desire to achieve something more than incremental reform aimed at solving particular, discrete problems revealed over the last several months.  

"These individuals will help put in place new common-sense rules of the road that will protect investors, consumers and our entire economy from fraud and manipulation by an irresponsible few." Mr. Obama's remarks hinted that the financial regulatory framework will extend to previously unregulated areas, such as hedge funds, mortgage brokers and various retirement scams.  

Mr. Obama indicated that the financial reform will not be narrowly focused on the banking system: "I can tell you that in principle for us to focus narrowly on bank regulation when huge amounts of money in the financial system are sloshing around outside of banks, that's a problem." However, Mr. Obama noted that it would be premature to give more details of his plans at this point.  

Mr. Obama also pledged to streamline and consolidate regulatory agencies. "The need to potentially consolidate some of the regulatory agencies that are out there, to streamline them, to make clear who's got what mission so that things aren't falling through the cracks, those are all going to be part of the review that we do over the next several weeks….We have been asleep at the switch. Not just some of the regulatory agencies, but some of the congressional committees that might have been taking a look at this stuff....We are going to have to greatly strengthen our regulatory apparatus, and update it from what worked for the 20th century financial system, so that it works in the 21st century financial system."  

Ms. Schapiro noted that "effective, thoughtful reform" is essential to restoring trust in our regulatory system, and she pledged to work closely with President-elect Obama's economic team to put in place "a regulatory structure that protects all investors."  

The timing on Mr. Obama's initiative is highly aggressive. Aides to Mr. Obama indicated yesterday that they hope to have the beginnings of a new financial regulatory regime ready to present on April 2, 2009, when the Group of 20 convenes in London.