Washington - The US Federal Reserve will get broad new powers of regulation over financial institutions under a new government plan to clamp down on investment banks wracked with billions of dollars in losses from the ongoing mortgage crisis, The New York Times reported Saturday. The new proposal, to be unveiled Monday, comes after the central bank took a series of dramatic steps in the past month to bail out financial firms that have reported more than 200 billion dollars in writedowns over mortgage-backed securities.
The US economy slowed dramatically towards the end of last year and may have since entered a recession due to a crisis that began in the housing market and has since spilled into the wider economy.
US Treasury Secretary Henry Paulson, who indicated earlier this week that the Fed's rescue measures would be accompanied by broader regulation policies, will present the new plan in a speech on Monday.
According to the Times, which released a summary of the new proposals, the administration hopes to consolidate existing regulatory agencies into three bodies that would have oversight over all financial institutions.
Most of the new provisions would have to pass through Congress, the Times reported. Opposition Democrats have called for tough supervision of investment banks that have operated largely unchecked by the government until now.
The current crisis was prompted by a record number of foreclosures since mid-2007 by homeowners with subprime mortgages - loans with often-deceptively variable interest rates that are typically offered to people with a poor credit history.
The Washington Post reported Saturday that the government was readying a separate plan to help struggling homeowners refinance their mortgages with the help of public funds.
The Fed has offered 430 billion dollars in Treasury securities and opened up emergency loan facilities to investment banks threatened with bankruptcy after sharp declines in the value of mortgage-backed securities.
