WASHINGTON — Former Federal Reserve Chairman Paul Volcker urged a massive overhaul of the financial regulatory oversight system on Monday, pressing for a simpler way to monitor markets and banks.
“We urge Congress, the administration, existing regulatory agencies, and financial institutions themselves to step up to the needed debate and set out an agreed framework for reform suitable for the 21st Century,” said Volcker, the founder and chairman of the Volcker Alliance, a nonpartisan, nonprofit organization.
The system for regulating financial institutions in the United States is “highly fragmented, outdated, and ineffective,” said the group’s new report, “Reshaping the Financial Regulatory System,” which was released at a National Press Club event.
The plan urges lawmakers to establish an oversight group, run by the Federal Reserve, with responsibility for all significant financial reform.
The report outlines “much-needed reform of the financial regulatory structure” and calls for urgency in implementing reforms.
A major change the Volcker report advocates is combining the Securities and Exchange Commission, the main regulator of securities, and the Commodity Futures Trading Commission, which oversees futures and options, into a new regulator designed to better protect investors.
Other key suggestions from the report include establishing a new independent agency, the Prudential Supervisory Authority, that has a strong link to the Federal Reserve, and moving the Office of Financial Research out of the Treasury Department.
“All the evidence says the time has come to do something,” said the 87-year-old economist. Volcker served as head of the Federal Reserve from 1979 to 1987.
A longtime advocate of financial reform, Volcker was the chairman of President Barack Obama’s Economic Recovery Advisory Board, which was established in reaction to the financial crisis, from 2009 to 2011.
The Volcker Rule, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, bans banks from using their own accounts on certain speculative investments. However, the Federal Reserve decided to give banks two more years to meet the requirements of the Volcker Rule in December.
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