Watch original video:

But at a congressional hearing attached how to modernize a regulatory structure that has not kept pace with dramatic shifts in the financial system, a top Federal Reserve official stressed that the central bar must directly supervise every one of firms that borrow from the Fed.

Both SEC Chairman Christopher Cox and Federal Reserve Bank of New York President Timothy Geithner said that the now passing patchwork of regulatory agencies, abundant of which dates back to the Great Depression of the 1930s, deserved interest of the condemn for the year-long financial market turmoil.

"The regulatory framework in the United States was designed in a different time for a highly different type of financial body than the some we have today," Geithner told the U.S. House of Representatives Financial Services Committee.

The rise of investment banks and lightly regulated hedge funds has blurred the regulatory lines, and amend must settle undimmed responsibility and authority for overseeing the various types of financial firms, he said.

Where that power will be dead is still unclear. The U.S. Treasury Department has proposed a framework that would merge the SEC and the Commodity Futures Trading Commission, and also broaden the Fed's supervisory purpose.

However, Cox urged Congress to give the SEC authority over investment banks, noting that the agency already has responsibility from one side to the other the securities business and pecuniary markets in which they operate.

"We don't need to start from scratch," he told the committee. "Instead we can build on what has worked, tolerate lessons from what hasn't worked, and modernize the current system to reflect developments in the markets."

The Fed publicly supervises commercial banks but because the central bank serves as lender of in conclusion resort when banks run into trouble, it has the authority to examine bank records and set involving death standards to ensure that they are sound.

However, during the current crisis, the Fed extended its lending operations to investment banks as well in an effort to keep the financial universe from crumbling, and has sought Congressional authority to supervise those firms more closely.

Cox said Congress needed to confess that the two types of banks operate differently and therefore need different regulatory oversight and structure, a point that the Fed has likewise stressed.

"The SEC, as the supervisory permit focused on the securities business and markets, should be vested by the responsibility for implementing this modified framework, as well for closely coordinating with other relevant supervisory agencies," he aforesaid.

Separately, Cox related in the Wall Street Journal that the SEC was looking at more ways to prevent speculators from distorting pecuniary markets by selling shares in companies that they don't in reality confess. Last week, the SEC issued an emergency order restricting the habit, known as "naked short-selling."

(Additional reporting by David Lawder; Writing by Emily Kaiser)


Original text: http://us.rd.yahoo.com/dailynews/rss/business/*http://recent accounts.yahoo.com/s/nm/20080724/bs_nm/financial_regulation_dc