HispanicBusiness

It is almost fatal: every crisis generates an impetus for more regulation, because the crisis reveals errors, shortcomings, loopholes and negligence, which were not so obvious during the times of abundance, or of exuberance, as some say.

President Obama has presented a proposal to regulate the financial sector and the expectation is that Congress will approve the set of measures by the end of the year.

The proposal includes the creation of new agencies and mechanisms to protect consumers and increases the power of some existing agencies to tighten the supervision of financial entities and instruments. It is the most comprehensive reform of the financial sector proposed since the Great Depression.

For instance, as the government now controls the quality of food or medicines, for the protection of consumers, the creation of a new entity is proposed to supervise the quality of financial products offered to the public. Among others, this includes mortgages, credit cards, savings and retirement accounts.

One of the most controversial measures is to increase the power of the central bank to supervise large financial entities whose failure may endanger the whole financial system. Additionally, some existing agencies are given stronger power to intervene endangered financial entities, while others will exercise more control over instruments such as hedge funds, derivatives and mortgages.

Finally, through the fusion of two existing agencies, the creation is proposed of a single bank supervisory entity, while stockholders will have greater say on the compensation of executives.

No wonder, the proposal was immediately criticized as falling short, or by going too far.

Isaac Cohen is the former director of the Washington Office of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). He is a commentator on economic and financial issues for CNN en Espanol TV and radio.