[JURIST] The Obama administration sent Congress draft legislation [press release and materials] Wednesday that would put the Federal Reserve [official website] in charge of regulating the largest financial firms [text, PDF]. The proposed legislation would create an eight-member Financial Services Oversight Council [text, PDF] to pinpoint risks in financial markets and would establish a National Bank Supervisor and Resolution Authority. It would also create within the Department of the Treasury [official website] an Office of National Insurance, the director of which would be charged [text, PDF] with identifying gaps in industry regulation that could lead to crises in the insurance or financial systems. The draft legislation would also amend the Bank Holding Company Act of 1956 [text] to give the Federal Reserve more power to regulate investment companies or advisors [text, PDF] registered with the Securities and Exchange Commission [official website] under the Investment Company Act of 1940 [text]. The purpose of the legislation is to prevent the recurrence of a crisis such as the one currently plaguing the financial system.

US President Barack Obama [official profile] proposed similar changes [JURIST report] in June. In March, US Treasury Secretary Timothy Geithner [official profile] indicated that the Department of the Treasury would propose stronger rules [JURIST report] in response to the current economic crisis. Geithner suggested that the Reserve and Treasury be given broader powers. In February, Geithner emphasized increasing restrictions on financial institutions [JURIST report] receiving government assistance.