In a sweeping proposal circulated over the weekend, Treasury Secretary Henry Paulson slaughtered a number of Washington's sacred cows, proposing to merge or eliminate institutions of long standing, including the Securities and Exchange Commission, and to create a controversial new role of supercop for the Federal Reserve. Mr Paulson said the regulatory system was broken, a growing sentiment in recent months in Washington as each of the nation's financial watchdogs failed in a different way to prevent the foreclosure crisis and credit-market turmoil spreading. "We need regulation, but if we have it, it should be just structured in a way that it has some way of being more effective," Mr Paulson said.
Congressional Democrats and others say the current crisis is the result of too little regulation, not too much. "It takes a certain chutzpah to say the appropriate response to a financial crisis is to loosen regulation," said Barbara Roper of the Consumer Federation of America, a consumer-advocacy group. Reaction from financial firms was cautiously optimistic. Bankers saw benefits to be won in the possibility of lighter, more streamlined regulation. But they also worried that rules designed to make the financial system safer could cut into profits.
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