Paulson offers sweeping rule changes

Treasury Secretary Henry Paulson on Monday proposed a set of sweeping changes to the nation's financial system, including a broad expansion of the Federal Reserve's powers, in what could herald the biggest regulatory overhaul of Wall Street since the Great Depression.
The plan comes as concerns about the housing crisis and its fallout in the financial system continues to fuel calls for change in Washington. The changes, if enacted, would be largely invisible to consumers but would drastically alter how the financial services industry is regulated.
"Government has a responsibility to make sure our financial system is regulated effectively," Paulson said. "And in this area, we can do a better job."
Among the plan's biggest proposals is to provide additional powers to the Federal Reserve, which, along with the Treasury Department, has attempted to shepherd the nation through the housing crisis. Earlier this month, the Fed orchestrated a marriage between JPMorgan Chase (JPM, Fortune 500) and Bear Stearns (BSC, Fortune 500), which was on the verge of a collapse that could have caused shockwaves throughout the financial system.
Under the Paulson plan, the Fed would essentially serve as a financial markets moderator, stepping in if the nation's markets were again threatened by an episode like the near collapse of Bear Stearns. Currently the central bank is responsible for setting the country's monetary policy as well as acting as a supervisor of certain banks and all bank holding companies.