Economists, bloggers and others weigh in on the administration’s regulatory overhaul proposal.

• The proposals are generally quite sensible. The unfortunate aspect is that political constraints have caused the administration to stop short of a full solution in certain areas, most notably in the consolidation of regulatory functions into fewer hands. Nonetheless, the country should be better off if these proposals are passed than if we were to remain as we are now. –Douglas Elliott, Brookings
• In seeking to undo the damage inflicted over the past decade by misguided government policies, the sweeping financial regulatory reform announced today by the Obama Administration will simply ensure that the current destitution of the American financial services industry will become permanent. As was the case with the deeply flawed Sarbanes-Oxley legislation of 2002, this move will further burden U.S. industry with unnecessary regulation that will decrease our ability to compete globally. –Peter Schiff, Euro Pacific Capital
• Cheers for the extension of regulation, including capital requirements, to all “Tier 1 FHCs” — which, in the report’s jargon, means any financial institution, whether or not it’s a conventional bank, that might have to be rescued in a crisis. –Paul Krugman, Princeton-NY Times
• Overall, there are no surprises here. Brick by brick, we are building the foundation for the next financial crisis; by all indications, it will be more disruptive and a great deal more damaging than the crisis of 2008-09. But presumably by then the authors will be out of office. –Simon Johnson, Baseline Scenario
• If you thought the bureaucracy was bad until now, just wait until you see what’s coming down the pike. Which is not to say that there aren’t any good ideas in this white paper. I like the fact that the CFPA will have the power to conduct Community Reinvestment Act examinations, for instance, and I love the fact that stockbrokers will — finally — have a fiduciary responsibility to their clients. The Obamacrats have also managed to sneak in legislation forcing opt-out, rather than opt-in, retirement plans for corporate employees. But there are weaknesses here, too, and not just at the org-chart level. Treasury has decided that no financial institution can be allowed to engage in any nonbanking activities at all — basically there’s no way that Walmart, for instance, or Safeway, will ever get a banking license. That’s bad for consumers. –Felix Salmon, Reuters
• Overall, the white paper offers a highly skewed narrative of the financial crisis. All of the misbehavior took place in the private sector. No mention is made of government policies that contributed. Instead, the story is one of government that needed a better regulatory structure and more powers. Intellectually, this is a very disappointing piece of work. But given political considerations, I cannot say that I am surprised. –Arnold Kling, EconLog
• In our view, this plan is as negative for financial firms as the industry feared. Still, this is not the end of the game for financial firms. This proposal will change radically as it slowly moves through Congress. We expect a flood of negative headlines in the coming weeks and months, especially as we expect the House Financial Services Committee to begin voting on legislation in July. Yet the congressional agenda is packed and key Senate leaders are distracted. So we see little Senate movement in 2009. That gives the industry lots of time to try to modify the final bill. –Jaret Seiberg, Concept Capital
• The White House plan is a significant first step towards reforming and holding accountable a financial system whose irresponsible, risky practices have destabilized our economy and devastated millions of hard working families… Despite this strong move by the White House, we must be on guard for a big fight with the financial industry and its lobbyists, who continue to try to dilute and nullify real financial reform. As the debate moves forward, we need a more robust program to stem home foreclosures. And we need to ensure that the Federal Reserve’s operations become more transparent and accountable to the interests of working families and to public officials. –Anna Burger, the Services Employees International Union
• If President Obama wants to be the pragmatist he says he is, he would lessen burdensome and ineffective mandates such as Sarbanes-Oxley even at the same time he was tightening regulation over other entities such as credit default swaps. But the plan to be unveiled today is simply “more of the same” overregulation Americans experienced under the Bush administration. –John Berlau, Competitive Enterprise Institute
• All told, I don’t think we should place enormous faith in the idea that any regulatory setup will work forever and ever. Under the circumstances, these proposals seem like a plausible improvement on the status quo and should also leave us in a much better situation to mop up a future mess if it arises. –Matthew Yglesias, Think Progress
• The Obama administration’s regulatory reform proposal includes many positive features, but it ultimately will not make the financial system safer for the simple reason that it conceals responsibility rather than holding regulators accountable for their failures. The basic story of this crisis was not that the regulatory authorities lacked the ability to rein in this disaster before it was too late. Rather, the basic story is that the regulatory authorities — most importantly the Fed — opted not to use their power to rein in the housing bubble. –Dean Baker, Center for Economic and Policy Research
• We are most concerned that reform efforts are shooting in the wrong direction. Most notably, we are concerned about the independence of the Fed. Traditionally, while the Fed has an important regulatory function, it is primarily concerned with its dual mandate of price stability and maximum sustainable growth. It traditionally fulfills this function through monetary policy, influencing things like money supply, interest rates, and the cost and availability of credit… The proposed reforms are turning the Fed into a regulatory conglomerate. Without a doubt, the Fed would then be faced with many politically sensitive decisions. The Fed is setting itself up for failure; the day will come that its decisions will be questioned. –Axel Merck, Merck Investments