On January 8, the Government Accountability Office (GAO) issued a report on Financial Regulation proposing a broad framework for “crafting and evaluating regulatory reform proposals.” The report (GAO-09-216) makes several recommendations intended to “be used by Congress and others to shape potential regulatory reform efforts”.
The GAO report notes that the U.S. financial regulatory system has not “kept pace with major developments in financial markets and products in recent years.” The report states that “[a]s the nation finds itself in the midst of one of the worst financial crises ever, the regulatory system increasingly appears to be ill-suited to meet the nation’s need in the 21st century.” Unlike other reports issued by the GAO that specifically propose specific measures to be adopted, the report offers a broad framework for “modern[izing] the outdated U.S. financial regulatory system.” The report highlights the following nine characteristics that should be ‘reflected’ in a new financial regulatory system:
- Clearly defined regulatory goals;
- Appropriately comprehensive;
- Systemwide focus;
- Flexible and adaptable;
- Effective and efficient;
- Consistent consumer and investor protection;
- Regulators provided with independence, prominence, authority, and accountability;
- Consistent financial oversight; and
- Minimal taxpayer exposure.
As to other GAO reports dealing with the financial crisis, early last month, the GAO issued its first report on the oversight of the Treasury’s Troubled Asset Relief Program (TARP). This prompted the House Financial Services Committee to hold a hearing to examine oversight concerns regarding Treasury’s conduct of TARP. Pursuant to section 106 of the Emergency Economic Stabilization Act the GAO is required to issue a report on TARP every 60 days.