While President Obama has taken a hands-off approach to other major policy initiatives such as healthcare reform and climate change legislation, he will take much more of a hands-on role with his proposed financial regulatory overhaul when he sends actual draft legislation to Capitol Hill this week.  In advance of a detailed roll out on June 17, the administration released an outline of its proposed overhaul that contains the reform elements the administration has floated since March.

Such provisions include:  the creation of a new regulator to provide consumer protection for financial products such as credit cards and mortgages; authority for a federal regulator to “wind down” a systematically risky non-bank institutions; addressing mortgage-backed securities’ weaknesses through increased reporting rules and a requirement that brokers must maintain some element of the risk in the securitization process; and a focus on the U.S. financial system’s global impact by working to improve the international regulatory structure.

Once sent to the Hill, the proposal will first be shepherded through the House of Representatives by Financial Services Chairman Barney Frank (D-MA).  However, Chairman Frank and other Financial Services Democrats (who have already been active on the issue of financial regulation, as discussed here and here) have been quick to indicate that what the White House sends them will not automatically be what is included in their final legislation.  Despite the crowded legislative agenda this summer, it has been reported that Chairman Frank could take up the proposal as early as the end of June, with a full vote on the floor of the House before the end of July.

On the Senate side, Banking, Housing and Urban Affairs Chairman Christopher Dodd (D-CT) has indicated that his committee will move on financial regulatory overhaul legislation in the fall.  This later timeline can be attributed to Chairman Dodd’s high profile role in the healthcare reform debate taking place this summer, as he acts as a surrogate to the Senate’s ailing healthcare leader, Senator Edward Kennedy (D-MA).

Following Wednesday’s roll out, Treasury Secretary Timothy Geithner will testify on Thursday before both the House Financial Services Committee and the Senate Banking, Housing and Urban Affairs Committee to defend the administration’s proposal.

We will continue to monitor this important issue and will provide updates on InsureReinsure.com.