Financial Regulation: A Framework for Crafting and Assessing Proposals to Modernize the Outdated U.S. Financial Regulatory System

This testimony discusses our January 8, 2009, report that provides a framework for modernizing the outdated U.S. financial regulatory system. We prepared this work under the authority of the Comptroller General to help policymakers weigh various regulatory reform proposals and consider ways in which the current regulatory system could be made more effective and efficient. This testimony is based on our report, which (1) describes how regulation has evolved in banking, securities, thrifts, credit unions, futures, insurance, secondary mortgage markets and other important areas; (2) describes several key changes in financial markets and products in recent decades that have highlighted significant limitations and gaps in the existing regulatory system; and (3) presents an evaluation framework that can be used by Congress and others to shape potential regulatory reform efforts. On January 22, we released an update to our biennial High-Risk Series, which described high-risk areas in federal programs, including by focusing on the need for broad-based transformations to address major economy, efficiency, or effectiveness challenges. Based on recent economic events and our past work on financial regulatory reform, we added the need to modernize the outdated U.S. financial regulatory system as a new high-risk area this year.