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ANDREA SEABROOK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Andrea Seabrook.

On Monday, The Treasury Department will unveil a sweeping plan to change the way the government oversees the nation's financial industry. The proposed overhaul comes amid the worst financial crisis in decades. From what we know now, the plan focuses more on oversight and less on tighter regulation.

Frank Langfitt, one of NPR's business reporters is here with us. And, Frank, you've read the summary. What's the administration want to do to keep a crisis like this from happening again?

FRANK LANGFITT: Well, one of the things it wants to do is have the Federal Reserve take on an investigative role. It'd be able to look at the books of firms it thinks are threatening financial stability throughout the system. Like investment banks like Bear Stearns or private equity firms. And if it doesn't like what it sees, it could make a company limit its financial risk.

Now, for the Fed this is a completely different sort of role.

SEABROOK: Yeah.

LANGFITT: Ordinarily, you know, it's the lender of last resort for banks and it sets interest rates. Now, it would be more of a watchdog.

SEABROOK: It can look in the books of all these different organizations.

LANGFITT: Yeah, absolutely.

SEABROOK: So, the financial system today, though, Frank, is big, obviously, very complicated. What's the administration say about monitoring it better?

LANGFITT: One of the things they really want to do is consolidate this hodgepodge of agencies they have overseeing it. And keep in mind today, there are, like, four banking regulators with overlapping duties. I got the summary right here - and this Treasury Secretary Henry Paulson - and here's a good line. He says, no one single regulator possesses all of the information and authority necessary to monitor systemic risk. And what that means is there's not, like, one agency that's watching this entire system to make sure it doesn't go haywire.

SEABROOK: So, would this plan establish that?

LANGFITT: Yeah, it would. It would pull al these agencies together. You know, this current system dates to the 1930s and everything has changed so much. You have so many different agencies looking at different things. And right now what it would allow is to kind of take a more holistic view of a system that really, for the most part, has outgrown the oversight system that was created to look at it.

SEABROOK: Now, all of this began, as we know now, with problems in the mortgage lending sector, especially the subprime mortgages. What does the administration propose to do about that?

LANGFITT: Well, they want to set up a mortgage origination commission, and it would look at the state level for licensing mortgage bankers and evaluate mortgages by state. But, you know, there's no regulation to prevent the sort of abuse that started all this. If you remember, you know, lenders gave loans to people who couldn't afford them.

SEABROOK: Um-hum.

LANGFITT: And then they sold those loans off, they're bundled into securities -some of them were worthless - and they spread like a virus through the system.

One of the Democratic Party's criticism of this whole plan is going to be it just doesn't have enough teeth, especially when it comes to the mortgage business. I spoke to New York Senator Charles Schumer by telephone when he was on a plane today and one of the things he said is there's a need to regulate mortgage brokers the way we regulate regular commercial banks. And here's what he said:

Senator CHARLES SCHUMER (Democrat, New York): For instance, it should be illegal for them to issue a mortgage to someone who cannot repay it. In other words, in some cases someone's income was $25,000 and their mortgage was $35,000 a year. A bank couldn't do that.

SEABROOK: So, Frank, what's the timeframe on this? It's just a proposal at this point. I assume it needs approval?

LANGFITT: Yeah, it does. A lot of this is going to have to be approved by Congress, which right now, of course, is run by the Democrats. And it's going to take a while because these problems have been building for years in the system and it's going to take quite a bit of time to figure out how to solve them. The other thing is these investment banks, they stand to lose a lot. They've got a lot of money invested in all of this and regulation could cost them a lot. And as you know, they give a lot of campaign contributions, so they have a lot of influence in Washington.

SEABROOK: NPR's Frank Langfitt, thanks very much.

LANGFITT: Happy to do it, Andrea.

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