Experts React to Regulatory Proposal

Treasury and finance experts are weighing in on President Obama's financial regulatory overhaul -- and their opinions so far have been decidedly mixed.

Bruce Lynn, Managing Partner, The Financial Executives Consulting Group :

"Not sure what a "systematically important payment" is supposed to be but if this is a reference to payments under credit default swaps or another security like instrument then I would think there is a need for some regulator to understand whether both parties have the ability to actual settle their "debts" to one another.

"The advent of these new markets (credit default markets, CDOs, etc) or any market where assets are bought and sold involves the same old questions if risk is to be minimized: Will I ever get paid? Will it be for the full value? When do I get paid?

"Bottom line, there needs to be a central source who oversees the clearing/settlement process for any "market" traded instrument. My question is whether it should be the Fed? Perhaps it depends upon the method of settlement. If it is by Fed wire than the Fed must step in as it is at risk."

Mark O. Conner, Principal, Corporate Treasury Investment Consulting LLC:

"Greater regulation of the processes is not really the solution—it's the people.

"What is really needed and what I believe would go much further in reducing market abuses is a higher standard for professioanl status in the finance industry. Specifically, specialized training should precede the licensing of brokers and other investment and capital markets professionals. As it is, most investment professionals all take the same exam, the FINRA Series 7 General Securities Examination, and all that is really needed to pass this test is a short prep class and cramming.

"These conditions ignore the importance of the responsibilities associated with creating, originating, recommending, and managing investments. Requisite training should be at least as challenging as that for nursing, accounting, engineering, certified financial analysts, and, arguably, even the practice of law, and this training should have a curricular overweighting toward ethical practices. Until the barriers to entry for the finance and investment industries are raised meaningfully, the prevailing culture of securitization-for-the-sake-of-fees, under-educated investment professionals, and sloppy lending practices will persist and will not be curtailed by added regulation on the back end of these processes."

Anand Goel, founder, Optimized Payments Consulting:

"Regarding the provision,"Strengthen Oversight and Functioning of Systemically Important Payment, Clearing, and Settlement Systems and Related Activities," it seems that this provision mainly deals with commercial financial instruments like tri-party repurchase agreements and OTC derivatives that are important to the liquidity of financial institutions and markets. It does not seem at this point that this provision would touch or have implications for the merchant payments systems like Visa/MasterCard, EFT networks, NACHA, etc.

"This proposal has to go through the House and Senate where legislation will be drafted and negotiated to make this plan work. So many things could change, including specific payment systems that could be regulated by this financial regulatory overhaul."