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ROBERT SIEGEL, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MICHELE NORRIS, host:

And I'm Michele Norris.

Treasury Secretary Henry Paulson says the U.S. has suffered under a vulcanized patchwork approach to financial regulation. So, today he proposed a complete dual free, a total transformation of how the U.S. government and financial markets interact. It's the most sweeping change since the depression.

NPR's Adam Davidson reports on that proposal, which comes on the midst of the country's financial crisis.

ADAM DAVIDSON: Surely the question most people have is a simple one: Is this big announcement today going to change things? Will it solve the financial crisis that may send the U.S. into recession? I asked some experts.

Unidentified Man #1: No. No.

DAVIDSON: No.

Unidentified Man #2: No.

DAVIDSON: No.

Unidentified Man #3: No.

(Soundbite of laughter)

Unidentified Man #3: This doesn't solve the problem. It doesn't come close.

DAVIDSON: All the names are on our Web site. These are Democrats and Republicans, Wall Streeters, academics and so on. Everyone agrees. This plan does nothing to get us out of the crisis were in. If it were in place, it would not have prevented the crisis from happening. Sound like Paulson-bashing, it's not. Here's the treasury secretary himself presenting the plan.

Secretary HENRY PAULSON (U.S. Department of Treasury): Some may view these recommendations as a response to the circumstances of the day. Yet, that is not how they are intended.

DAVIDSON: So what is this proposal if it has nothing to do with the circumstances of the day? It's designed to deal with, well, the circumstances of the past 150 years. The U.S. government has dozens of agencies and commissions that watch over financial markets. There's the SCC, the CFTC, FTIC, FOMC, all these Cs, the Controller of the Currency, the Office of Thrift Supervision, it goes on. Each of these agencies came about to solve some specific problem.

Professor HAL SCOTT (Finance, Harvard University): Here's an example.

DAVIDSON: Hal Scott teaches finance at Harvard.

Prof. SCOTT: In the Civil War, we made a major change in our regulatory system. That was motivated largely by Lincoln's necessity to raise funds to fight the war.

DAVIDSON: President Lincoln came up with a national bank charter. It was a way to help them get money to buy guns and bullets. Scott says that move stopped being useful somewhere around 1865. It is still part of U.S. financial market regulation. Other regulations that are still with us came after the financial panic of 1907, the depression crises in the '50s, '80s, and '90s. Paulson says it's unworkable, and alphabet soup of solutions to problems, nobody remembers anymore.

Sec. PAULSON: If we could start over, which of course we can, what regulatory model would we build?

DAVIDSON: It would be simpler. Some current agencies would go away, new ones would be created. The basic idea is to concentrate regulations in a small number of properly targeted agencies, especially the Federal Reserve. Why? To help the U.S. compete in this much faster global economy. Secretary Paulson, former head of investment bank Goldman Sachs has talked for years about how out-modeled regulations are like handcuffs, keeping the U.S. from making as much money as it could. Harvard's Hal Scott.

Prof. SCOTT: It's not going to, you know, put money in your pocket tomorrow. But, you know, over the next 50 years, it'll put a lot of money in people's pockets, because we'll have a better gross system.

DAVIDSON: Paulson is the first to say most of his plans won't come into effect anytime soon, certainly not before he follows President Bush out of office. It will be many years and surely many contentious fights before any of these reforms come to path.

Adam Davidson, NPR News, New York.

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