Aside from being famous for sitting under an apple tree and getting hit in the head by an apple, Newton is also credited with the third law of motion. According to high school physics and also Wikipedia, the principal gist of that third law is that for every action, there is an equal and opposite reaction. Given the direction and the force of the financial crisis, it was logical to expect that the force of the reaction, in the form of new regulatory reforms, would be strong. On June 17th, the Treasury Department (Treasury) released its much anticipated white paper, titled “Financial Regulatory Reform: A New Foundation.” The white paper sets out the key proposals intended to restore confidence in the integrity of the financial system. The full text of the white paper and the various accompanying fact sheets may be accessed from our Financial Crisis website.

This alert provides a brief overview of the proposals detailed in the white paper. We intend to supplement this alert with more detailed analyses and discussions of particular aspects of the suggested reforms, the potential concerns raised by the reforms for market participants, and the questions to be answered by policymakers as we move from aspiration to legislation and regulation. We also will provide regular updates on the other set of inevitable reactions—those of industry groups and other interested commentators regarding these proposals.

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