U.S. financial overhaul will take years: Fed official
ABU DHABI (Reuters) - Overhauling the U.S. financial system will take years, an official of the New York Federal Reserve said on Monday, and must include a congressional ruling on overseeing ratings agencies in particular.
William Rutledge, executive vice-president of the New York Federal Reserve Bank, criticized ratings agencies for failing to adequately identify risks in subprime mortgages.
Governments around the world have thrown trillions of dollars at the financial crisis to prevent a global recession, help thaw frozen credit markets and calm jittery stock markets.
"The U.S. financial regulatory structure has been shown to have some major weaknesses," Rutledge said at a conference in the UAE capital, Abu Dhabi.
"It is an incredible learning experience and will take years before there could be changes in our financial architecture and before we have a stronger and more resilient system."
Lawmakers will be holding a series of meetings to analyze the causes of the global economic turmoil and the regulatory reforms that should take place to prevent another meltdown, including a meeting of world leaders in Washington next month.
"Policymakers in the United States should ensure that key people have the tools to tackle any crisis," Rutledge said on Monday.
He said investors should move away from relying on ratings agencies, which should also come under more scrutiny by U.S. regulators after they underestimated the risk of failing subprime mortgage loans.
When problems emerged with sub-prime mortgages, many mortgage-backed securities that had been given triple-A credit ratings took losses.
"Oversight of ratings agencies should get stronger and firms must take greater role ... rather than slavishly following ratings agencies," Rutledge said.
The U.S. government should look into whether the Securities and Exchange Commission could be given more powers to oversee ratings agencies, he added.
(Writing by Daliah Merzaban; Editing by Andy Bruce)
