Critics of financial overhaul plan line up

WASHINGTON — In proposing the broadest overhaul of financial oversight since the Great Depression, the Bush administration has kicked off a fierce debate. It pits those eager to revamp an antiquated system against an industry opposed to excessive regulation.

The administration is aware of the hardening lines. The 200-page plan set for release today comes with the financial system in the most severe credit crisis in two decades.

That crunch has meant billions of dollars of losses for big banks and investment houses. It has caused the near-collapse of the country's fifth-largest investment bank, made it harder for consumers and businesses to get loans and pushed the U.S. to the brink of a recession.

The market turmoil has presented an opening for critics to make the case for strong federal rules to crack down on abuses that they believe were at the heart of the crisis.

But Treasury Secretary Paulson, who has led the rewrite effort, rejects that criticism.

"I do not believe it is fair or accurate to blame our regulatory structure for the current turmoil," according to a draft of today's speech.

Administration officials have sought to frame the proposals as an effort to devise a system that would help keep U.S. companies competitive in a connected global economy.

The plan would merge some federal bank regulators, weaken the agency that regulates the stock market and broaden the shoulders of the Federal Reserve, which will become the chief market regulator.

It would allow insurance companies to opt out of state regulation in favor of federal oversight. It would merge the regulation of the stock market and futures market to better reflect how commodities such as oil and soybeans have become investment vehicles that rival stocks and bonds.

And for the first time, hedge funds would face federal regulation, albeit with a light touch.

Information from McClatchy News Service and The Washington Post

is included in this report.

Housing secretary expected to resign

WASHINGTON — Housing Secretary Alphonso Jackson is expected to resign today, The Wall Street Journal reported Sunday night.

Jackson has scheduled a news conference for 9:45 a.m., 15 minutes before Treasury Secretary Henry Paulson is supposed to outline plans for dealing with the financial crisis set off by the risky mortgage lending.

If Jackson steps down, it would remove a key player from the administration team dealing with the problem.

Jackson, 62, has been under investigation by the Justice Department and the housing department's inspector general in inquiries focusing on whether he gave lucrative housing contracts to friends.

The New York Times