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Washington, DC - House Financial Services Committee Chairman Barney Frank today announced that the committee will hold a series of hearings on the policy implications of the transformation of domestic and international financial markets -- chief among them are the dramatic growth in the share of assets held outside the commercial banking system, the complex arrangements that link firms that are regulated differently (or not at all) and the increasing amount of leverage. The committee will explore the potential systemic risks associated with these developments, the adequacy of current oversight and tools, and the extent to which existing structures are adequate to respond to future problems. Specifically, the hearings will examine:
- The regulatory implications of providing investment banks and others access to the discount window.
- Various proposals including those from the Financial Stability Forum and New York Federal Reserve Bank President Timothy Geithner to improve the oversight and mitigation of systemic risk.
- The need for enhanced capital and reserve requirements for financial firms.
- The current powers of the Federal Reserve and other regulatory agencies to determine whether existing authority is sufficient to protect the financial system and the taxpayers.
“As the extraordinary measures utilized to respond to the Bear Sterns crisis demonstrated, we have failed to develop a regulatory system with the reach and capacity to protect the system against the large risks embedded in our increasingly interconnected markets. These hearings are designed to focus on indentifying how much reach and what new capacities are needed to avoid – or respond to – the next crisis,” said Chairman Frank
Witness expected to be invited to testify before the committee include Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben S. Bernanke, New York Federal Reserve President Timothy Geithner, S.E.C. Chairman Christopher Cox, other federal regulators, academics, economists and market participants who can address the current state of America’s and other jurisdictions financial regulatory system and can testify on how best to measure and limit risk without stifling innovations and improve market liquidity and breadth.
Beginning in July and continuing in the fall, the committee will examine the regulatory implications of the rescue of Bear Stearns through the intervention by the Federal Reserve. Subsequent hearings will examine, in light of the collapse of Bear Stearns, the ability of the regulatory structure to assess and mitigate systemic risk in order to avoid a similar or more serious crisis in the future.
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