19 Dec 2008

Obama promises to bolster financial regulation

8:29 am on 19 December 2008

US President-elect Barack Obama has promised to strengthen financial regulatory agencies and crack down on runaway "greed and scheming" in an effort to restore stability to a reeling US economic system.

Mr Obama named seasoned regulator Mary Schapiro to head the Securities and Exchange Commission and Gary Gensler to lead the Commodity Futures Trading Commission.

The president-elect said they would lead broad financial regulatory reform.

"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 said.

Barack Obama also named Georgetown University law professor Daniel Tarullo to fill one of the seven seats on the Federal Reserve Board, which is battling to ease a credit crisis and fend off a deepening recession.

The Securities and Exchange Commission, created after the 1929 stock market crash to police markets and restore investor confidence, has come under heavy criticism after the Wall Street meltdown and financial scandals exposed lapses in its oversight.

The collapses of investment firms Bear Stearns and Lehman Brothers prompted scathing criticism from lawmakers who said the agency, charged with monitoring publicly traded firms, should have flagged the problems earlier.

Criticism has intensified with the $50 billion investment fraud, one of the biggest in history, allegedly carried out over many years by Bernard Madoff.

Ms Schapiro is chief executive of the Financial Industry Regulatory Authority, a self-regulatory body for the securities industry.

She served as an SEC commissioner for six years, then became chairwoman of the Commodity Futures Trading Commission in 1994 during the Clinton administration.

Mr Gensler was a partner at Goldman Sachs for a decade and was undersecretary of the Treasury in the Clinton administration.