NEW YORK – Treasury Secretary Timothy Geithner pledged on Monday to move with speed to implement the biggest overhaul of the financial system since the Great Depression. He said that a top priority will be simplifying the complicated forms that consumers have to fill out to get credit cards, auto loans and mortgages.
"We will move as quickly as possible to bring clarity to the new rules of finance," Geithner said in a speech to Wall Street executives and students at New York University's Stern School of Business. "The rule writing process traditionally has moved at a frustrating, glacial pace. We must change that."
Geithner said that officials from all the government agencies involved in financial reform including Treasury, the Federal Reserve, the Securities and Exchange Commission and various banking regulators, will set target deadlines for writing the new rules. He said that the Financial Stability Oversight Council, the new panel that will oversee the process, will develop an integrated road map for implementing the overhaul at its first meeting in September.
Geithner's speech Monday was the opening salvo in what the administration says will be an extensive outreach effort to educate the public about the new law, which was passed by Congress and signed into law by President Barack Obama last month.
"We want to move quickly to give consumers simpler disclosures for credit cards, auto loans and mortgages so that they can make better choices, borrow more responsibly and compare costs and services," Geithner said.
He said that one of the first things that will be done in this area will be to get input from financial firms and consumer advocates on how to combine the existing two separate and inconsistent federal mortgage disclosure forms into one new, easy-to-understand federal disclosure form.
Geithner said another top priority will be to move forward with the overhaul of mortgage giants Fannie Mae and Freddie Mac, saying the administration will meet the target set in the overhaul law of presenting Congress with a plan early next year.
Fannie and Freddie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. The government took over both institutions in September 2008 when they came close to collapse under the weight of rising mortgage defaults. Republicans were highly critical that the administration did not include significant reforms of Fannie and Freddie in the overhaul legislation.
Geithner said the administration will address the problem, starting with a Treasury-sponsored conference on the issue on Aug. 17. Geithner said the information gained at that conference would help the administration develop significant changes to how Fannie and Freddie operate.
"The system we have today is not tenable for the future," Geithner said during a question-and-answer session. "We are going to have to bring about quite dramatic reforms."
The financial overhaul bill gives the government new powers to break up companies that threaten the economy, creates a new agency to guard consumers in their financial transactions and stiffens regulation of complex financial instruments such as derivatives. Congress and the administration were prompted to move in an effort to prevent a repeat of the 2008 financial meltdown that pushed the country into a severe recession.
Geithner said one of the most important areas that the administration will address in getting the new law up and running will be in establishing in conjunction with other countries higher standards for the capital that banks must hold to provide a cushion against losses.
"Capital requirements are the financial equivalent of having speed limits on our highways, antilock brakes and air bags in our cars," Geithner said. "Part of what made this crisis so severe was that capital requirements failed to keep up with risks and failed to force firms to prepare for the possibility of a very severe recession with a substantial reduction in house prices."
Geithner said that using the powers provided by the new law, U.S. regulators will make sure that financial firms hold a lot more capital than they did before the crisis.
Crutsinger reported from Washington.