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18 Jun, 2009 00:08

Obama proposes overhaul of US banking regulations

Barack Obama has proposed the largest overhaul of American finance since the Great Depression. But as he plans to increase regulation and government oversight of the financial sector, some economists remain skeptical.

Obama’s new plan would require big banks to put more money aside and create an agency to protect the interests of those consumers using credit cards and holding mortgages.

The move is aimed to prevent future financial crises. However, critics fear the reforms will only lead to additional state intervention.

Peter Schiff, President of the Euro Pacific Capital investment company, and Gerald Celente, founder of the Trends Research Institute, had predicted the current economic crisis. They believe government regulation, along with the Federal Reserve, caused this financial meltdown in the first place.

“The prime entity behind the crisis is the federal reserve system by injecting money backed by nothing, created out of thin air. They are the ones who created the bubbles,” Celente claims.

Schiff also believes that greater government control is not the way to move the US economy forward.

“The reality is that government regulation did much more harm than good,” Schiff says.

But the US president is convinced that something must be done fast.

“The events of the last few years offer ample testimony for the need to make significant changes,” Obama has said.

And according to Obama’s plan, federal agencies will become more powerful.

“I am proposing that the Federal Reserve be granted new authority and accountability for regulating bank holding companies and other firms that pose a risk to the entire economy,” Obama has said.

“Unfortunately, whenever the government creates a problem, they are always rewarded because they claim it’s the market that caused the problem,” Schiff says.

“It’s like putting a set of breaks on a car that’s already crashed,” Celente sums up.