WASHINGTON, DC-The Treasury Department has released a much-awaited blueprint to overhaul the country’s system of financial oversight. In broad terms it assigns more power to the Federal Reserve Bank–power that the agency has de facto assumed over the past nine months as it dealt with the meltdown of Lehman Bros., et al. It also creates a new oversight office, with merged offices and functions. Much of the plan requires approval from Congress–a fact that all but ensures the final structure will be markedly different than what Treasury has put forth.

For the real estate industry the requirement that originators keep 5% of loans that they securitize in RMBS or CMBS is of distinct interest–if it helps jump-start the moribund capital markets as it is hoped it will do. Other changes proposed by the Administration, though, promise to pack an equally potent wallop albeit in the longer term.

For starters, Treasury is proposing to make the Federal Reserve act as an overseer of companies deemed “too big to fail”–a term that has become part of the industry lexicon after nine months of financial crisis, but has yet to be adequately defined. In this plan such companies are termed “large and interconnected” a category that appears to go beyond banks to include other financial institutions.

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