Yet another Bush Administration official bites the dust. This time, it is embattled Housing Secretary Alphonso R. Jackson. He is stepping down as HUD chief, effective April 18, 2008. The New York Times reports that controversy has followed Jackson since his appointment:

In 2004, less than two months after his confirmation as housing secretary, Mr. Jackson told a House panel that he believed poverty “is a state of mind, not a condition.” Two years later, he said in a speech that he had canceled a contract for a company after its president told him that he did not like Mr. Bush. Mr. Jackson later said he had made the story up.

The latest problem is to do with an FBI investigation of whether he has been favoring friends with valuable government housing contracts, rather than going through a government approved process of awarding such contracts.

Johnson did not state reasons for his resignation, giving the old “personal and family matters” standby. He has been an integral part of addressing the current financial crisis (you know, the one instigated by the subprime market crash). However, the scandal-ridden Bush Administration doesn’t seem to have the high level of tolerance it had in 2004, right after President Bush won re-election.
This is not the only big news to come from the Bush Administration today. Even as Johnson announced his resignation, Treasury Secretary Henry Paulson unveiled a series of proposals that he claimed will increase Wall Street regulation. The measures, however, are considered fairly toothless and Congressional Democrats are already vowing to draft legislation that makes Wall Street regulation stronger.

It is worth noting, however, that the latest Bush Administration proposals do nothing to address the mortgage market and subprime securities problems that set off the current crisis.

Tags: Alphonso R Johnson, resigns Housing secretary, home mortgage loan, mortgage loan blog,
Bush Administration, Bush Administration scandal, subprime market crash

In his Blueprint for a Modernized Financial Regulatory Structure, Treasury Secretary Henry Paulson calls for sweeping reform to the current financial regulatory system including insurance.  The proposal calls for a three headed regulatory structure that would be answerable to the Federal Reserve under it’s role as regulator of market stability. 

It would shift control of insurance regulation, now under the jurisdiction of states, to the federal level.  Insurance regulation as it now stands is highly inefficient due to the lack of uniformity across state lines.

Our financial system is much more interconnected structure these days, with the distinction between commercial banking, securities and insurance sectors now blurred.  State level insurance regulation leaves a glaring weakness for federal oversight of the financial marketplace.

A dual federal and state regulatory system would be established that would allow insurance companies the choice of being regulated at the national level under the optional federal charter(OFC).  The proposal calls for the creation of the Office of National Insurance(ONI) that would help facilitate regulatory cooperation and consistency between state and federal regulatory structures.

The National Association of Insurance Commissioners(NAIC), a coalition of state insurance regulators, have already spoken out against the proposed changes that would supplant their current regulatory powers.  Insurance companies on the other hand have come out in full support of the proposal as they have been criticizing state level regulation for years and have been seeking this type of reform for some time.

Earlier today, Treasury Secretary Henry Paulson released his Blueprint for a Modernized Financial Regulatory Structure, a study that was commissioned back in March of 2007.  The 212 page proposal would overhaul the nation’s banking system and give the Federal Reserve broader regulatory powers.

The report acknowledges the diminished role of the Fed’s discount window lending as a “market stability” tool.  The Fed’s normal purview are commercial banks but in today’s financial markets, regular banks have a much smaller role as credit intermediaries than they used to.

In the current financial crisis, the Fed has had to step in to lend credit to financial institutions that are normally under the regulatory control of the Securities and Exchange Commission.  The proposal would legitimize the actions that the Fed has already taken and broaden it’s lending powers to non Federally Insured Depository Institutions.

The proposal also calls for a modern streamlining of regulatory powers that would eliminate the inefficient overlapping of regulatory control that we currently have.

“Due to it’s sheer dominance in the global capital markets, the U.S. financial services industry for decades has been able to manage the inefficiencies in it’s regulatory structure and still maintain it’s leadership position.”

“The United States can no longer rely on the strength of it’s historical position to retain it’s preeminence in the global markets.”

The Fed would basically become the head of this new regulatory structure and would broaden it’s market stability function in order to better cope with systemic risk.

Many of these regulatory changes will require legislative approval and because this is an election year it is unlikely that any these changes will take place under the current administration.