Paulson says new rules needed for failing financial firms

U.S. Treasury Secretary Henry Paulson called for regulatory changes that would allow financial firms to fail without threatening broader market stability. The Treasury chief also proposed steps providing for the president to approve of any use of taxpayer funds to aid a financial company. In a speech in London today, Paulson identified a legal gap that leaves unspecified how to deal with failures of companies that don’t take deposits, such as investment banks. Paulson’s proposals aim to tighten supervisors’ oversight of lenders and dealers while at the same time discourage companies from depending on a government rescue if their bets go wrong. His speech comes a week before a congressional hearing to debate a regulatory overhaul in the wake of the credit crisis that caused the near-bankruptcy of Bear Stearns. For the full story visit http://www.latimes.com/business/la-fi-paulson3-2008jul03,0,5334817.story