Feds act on finance oversight.

The Treasury Department unveiled a host of measures on Monday designed to make the U.S. regulatory system more efficient while providing better oversight in order to avoid financial crisis such as the subprime crisis and the resulting current credit crunch.

"We should and can have a structure that is designed for the world we live in, one that is more flexible, one that can better adapt to change, one that will allow us to more effectively deal with inevitable market disruptions and one that will better protect investors and consumers," Treasury Secretary, Henry Paulson, said. "The challenge is to evolve to a more flexible, efficient and effective regulatory framework." The Treasury Department report addressed the current tumult in the economy, the subprime crisis and the resulting credit crunch, by stating that in the short term it would create a commission to oversee mortgage origination. Prominent on its list of longer-term goals is an action to broaden the Federal Reserve's supervisory role to include serving as a system-wide watchdog that would act to head off financial crisis like the current problems. Written reports have questioned whether such a role would be possible, pointing out that the Federal Reserve closely monitors Citigroup, one of the biggest subprime losers and that it only became aware of the gravity of Bear Steams' recent catastrophic meltdown--in which the firm had to be absorbed by JPMorgan Chase in an emergency fire sale acquisition--when that firm was less than 24 hours away from having to file for bankruptcy. The provision was included to address widespread calls for greater oversight of investment banks, which are unregulated but--as the subprime crisis and the credit system's clear reliance on the process of debt securitization have made clear--have become a far more critical component of the U.S. financial system."Capital markets and the financial services industry have evolved significantly over the past decade," the Treasury Departments statement read. "Globalization and financial innovation, such as securitization, have provided benefits to domestic and global economic growth; while highlighting new risks to financial markets."