Treasury Secretary Henry Paulson is proposing the most sweeping overhaul of regulations for the financial industry since the Great Depression, saying Monday that the measures are not meant to remedy immediate economic concerns.
Paulson said the proposal is an "aspirational model" for regulation, designed to be flexible, but that it should not be implemented until the difficulties are resolved.
"This blueprint addresses complex, long-term issues that should not be decided in the midst of stressful situations and should not be implemented to add greater burden to a market already under strain," Paulson said.
"These long-term ideas require thoughtful discussion and will not be resolved this month, or even this year."
The proposal gives the Federal Reserve new powers to act as a "market stability regulator," including authority to examine the books of any financial institution — not just banks — that might pose a threat to the stability of the financial system.
The rising tide of bad debt has made it harder for consumers and businesses to get credit and sparked fears of a recession, which many economists believe is already here.
Business groups are split on Paulson's newly recommended approach, and banking lobbyists are critical of some of the details affecting their industry.
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