US Treasury Secretary Henry Paulson was to unveil a plan yesterday to beef up the Federal Reserve in the latest US bid to calm economic turmoil stirred up by the "subprime" lending crisis.
The federal government was to propose giving sweeping new oversight powers to the Fed, including tighter surveillance of financial markets in a bid to avoid calamities like the current US mortgage chaos.
US financial regulatory agencies have been accused by experts of failing to recognize rampant excesses in mortgage lending until after they set off what is now seen as the worst US financial crisis in decades.
"With very few exceptions, most of this blueprint should not and will not be implemented until after the present market difficulties are past," Paulson said in an interview with the Wall Street Journal.
"But we've got a chance of getting people to look at it more broadly now. In that way, I think the timing is great," he said in its online edition.
Paulson scheduled a press conference for 3pm GMT yesterday at the Treasury Department where he was expected to unveil the restructuring plan.
A summary obtained over the weekend by US media indicated the Fed would gain the power to investigate any activities of financial institutions that threaten US economic stability, gather information and combat risks to the financial system as a whole.
The proposal is the most ambitious overhaul of the regulatory agencies since the mid-19th century, when the system was gradually put into place after the US civil war, the Journal reported.
The Securities and Exchange Commission would lose some of its authority and is likely to be combined with the Commodity Futures Trading Commission that regulates trade in gas, oil and other goods, the New York Times said.
The report came as new statistics showed US consumer spending stalled in February despite rising incomes as Americans boosted savings amid recession fears.
The subprime crisis appears to have claimed another victim yesterday as the Journal reported that US Housing and Urban Development Secretary Alphonso Jackson was poised to announce his resignation.
Citing people familiar with the matter, the newspaper said the departure would deal a blow to efforts by the administration of US President George W. Bush to tackle the housing and mortgage crisis.
On Wednesday, Paulson called on the Fed to broaden its surveillance of financial institutions, just days after it authorized investment banks -- including Goldman Sachs, Merrill Lynch and Lehman Brothers -- to use emergency measures and borrow at the discount rate normally reserved for commercial banks.
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