Paulson to Wall Street: It’ll cost you

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The cheap money the Federal Reserve is making available to brokerages may not be so cheap after all, Treasury Secretary Hank Paulson suggests in a speech today.

Speaking to the U.S. Chamber of Commerce, Paulson indicated that the Fed’s decision on March 16 to allow brokerages to borrow directly from the central bank -- a privilege previously extended only to commercial banks -- would mean more regulation of the securities industry.

‘The Federal Reserve should have the information about these institutions it deems necessary for making informed lending decisions,’ Paulson said. ‘Certainly, any regular access to [Fed loans] should involve the same type of regulation and supervision’ that commercial banks face.

But just how much regulation the administration would support isn’t clear. For one thing, Paulson noted, the Fed opened its lending window to brokerages as an emergency move to address the worsening credit crunch.

‘It would be premature to jump to the conclusion that all broker-dealers or other potentially important financial firms in our system today should have permanent access’ to Fed loans, he said.

Still, if traders needed an excuse to take profits in major brokerage stocks after their bounce last week, the threat of more government oversight is good enough. Shares of Goldman Sachs Group, where Paulson spent much of his Wall Street career, were down about $3.63 to $176 in afternoon trading. Merrill Lynch was off $2.72 to $45.13.