Nason defended a proposal to establish greater Federal Reserve Board oversight of investments that borrow from the central banks discount window but also reiterated the White House position that establishing such oversight permanently over Wall Street would not pay off.
"If we expand bank-like regulation to a wider range of firms, it seems that two outcomes are possible," Nason said in his prepared remarks at Chatham House, home to the Royal Institute of International Affairs.
He continued:
"One outcome could be that innovation and risk-taking decline to levels below what the market would normally allow. This could inhibit overall economic growth and could push market-permitted risk-taking to those firms not swept into broader regulatory reach. Another outcome would be to provide a false sense of security to market participants, potentially leading to less market discipline and even greater complexity and opacity in the future that could lead to even greater financial instability. Both of these outcomes are unattractive. But so is the status quo. Change, in one form or another, is likely to come."
- Bill McConnell
See full transcript of Nason's remarks
U.S. Treasury Assistant Secretary David G. Nason spoke in London Tuesday to spell out to European regulators and financiers how the Bush administration envisions rolling out its blueprint for reshaping regulation of U.S. Capital markets.
