Paulson To Provide Fed More Powers Oversighting Financial Markets

June 19, 2008 11:46 a.m. EST

Washington, D.C. (AHN) - U.S. Treasury Secretary Henry Paulson is pushing for changes in order to expand the role of the Federal Reserve and to give it more powers to regulate the financial system.

Paulson said on Thursday that the the government must move quickly to give Federal Reserve to oversign the financial markets, especially following the vulnerable brokerage firms like Bear Stearns & Cos.

"We must...move much more quickly to update our regulatory structure," Paulson said, according to the excerpts provided by the Treasury Department ahead of his speech later today.

He added the Fed the authority should be able to get information needed from financial companies "and the responsibility to intervene in order to protect the system."

The regulators are also planning to allow the investment banks to access to Federal Reserve loans, if the central bank decides to shut down an emergency program in September, the reports said.

Paulson is scheduled to deliver an update on markets and the economy in a 12:45 p.m. speech in Washington.

At present, the Fed and Securities and Exchange Commission are overseeing the investment banks. But they are working to formulate a MOU to be able to guide the sector jointly.

Last month, Bear Stearns Cos. shareholders voted on the most historic deal on Thursday approving the sale of the company to J.P. Morgan Chase & Co.

Bear Stearns, which officially became a part of J.P. Morgan by Friday, was sold for around $1 billion offered by the investment house

The deal to sell the 85-year old brokerage, which had a stock-market value of $20 billion in January 2007, was engineered in March by the Federal Reserve of New York and Treasury Department.

The decision was made to avoid a collapse of the company, which some market analysts dreaded to create a financial tsunami and damage to the broader American financial system.