Who Regulates Whom? An Overview of U.S. Financial Supervision [December 8, 2010]   [open pdf - 412KB]

"This report provides an overview of current U.S. financial regulation: which agencies are responsible for which institutions, activities, and markets, and what kinds of authority they have. Some agencies regulate particular types of institutions for risky behavior or conflicts of interest, some agencies promulgate rules for certain financial transactions no matter what kind of institution engages in it, and other agencies enforce existing rules for some institutions, but not for others. These regulatory activities are not necessarily mutually exclusive. [...] Federal securities regulation has traditionally been based on the principle of disclosure, rather than direct regulation. Firms that sell securities to the public must register with the Securities and Exchange Commission (SEC), but the agency generally has no authority to prevent excessive risk taking. SEC registration in no way implies that an investment is safe, only that the risks have been fully disclosed. The SEC also registers several classes of securities market participants and firms. It has enforcement powers for certain types of industry misstatements or omissions and for certain types of conflicts of interest. Derivatives trading is supervised by the Commodity Futures Trading Commission (CFTC), which oversees trading on the futures exchanges, which have selfregulatory responsibilities as well. Dodd-Frank has required more disclosures in the previously unregulated over-the-counter (off-exchange) derivatives market and has granted the CFTC and SEC authority over large derivatives traders. The Federal Housing Finance Agency (FHFA) oversees a group of government-sponsored enterprises (GSEs)--public/private hybrid firms that seek both to earn profits and to further the policy objectives set out in their statutory charters. Two GSEs, Fannie Mae and Freddie Mac, were placed in conservatorship by the FHFA in September 2008 after losses in mortgage asset portfolios made them effectively insolvent. Dodd-Frank consolidated consumer protection rulemaking, which had been dispersed among several federal agencies in a new Bureau of Consumer Financial Protection. The bureau is intended to bring consistent regulation to all consumer financial transactions, although the legislation exempted several types of firms and transactions from its jurisdiction."

Report Number:
CRS Report for Congress, R40249
Public Domain
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