WASHINGTON (CNN) - One of President Obama's leading economic advisors called Wednesday for major changes in the way the financial system is regulated - especially firms whose failure could sink the nation's troubled economy - and warned that this oversight would come with a major price tag.
“It’s not going to be cheap,” Paul Volcker told the Senate Banking Committee Wednesday, suggesting that it would cost "billions of dollars" more.
Volcker, chairman of the President’s Economic Recovery Advisory Board and former Federal Reserve Board chairman, called for radical changes in the regulation of the country’s financial system. His recommendations were based on the global financial report, “Financial Reform: A Framework for Financial Stability.” The report was released in January from the Group of Thirty (G30), a committee he co-chaired that included Treasury Secretary Timothy Geithner and Director of the White House National Economic Council Larry Summers.
He said Fannie Mae and Freddie Mac's status as hybrid public-private enterprises should come to an end. He also called for stricter disclosure standards for major hedge funds or equity funds.
Hours earlier, a money manager who sounded the alarm on Bernard Madoff told a House subcommittee the Securities and Exchange Commission was "never capable" of catching the alleged Ponzi scheme operator, and called for a new, more powerful regulator who would combine the powers of all the federal government's financial regulatory organs.
Volcker did not echo that recommendation, or release details on how these new regulations might be enforced. He told the committee the Federal Reserve should play “continuing role in promoting and maintaining financial stability,” though he did tell senators that he did not believe the Fed should assume chief oversight.