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US Congress begins mapping financial reform
(Agencies)
Updated: 2008-10-22 11:14 WASHINGTON -- The long road to US financial oversight reform began to take shape on Tuesday at a congressional hearing where many lawmakers clamored for more transparency in exotic debt securities.
With markets in turmoil over the worst financial crisis in generations, members of a House of Representatives committee sharply criticized bankers for a decade-long surge in leverage, risk and mortgage-lending abuses that produced a bonanza for a handful of elite investors, but a disaster for the economy. As emergency measures to bail out banks and stabilize markets are implemented in the Bush administration's last days, Congress in the months ahead will tackle longer-term reforms likely to reshape the Washington-Wall Street relationship. "Our financial regulatory system is broken and needs to be fixed," said New York Democratic Rep. Gary Ackerman. A top goal must be to "never again have the taxpayers pay for Wall Street's mistakes," said Illinois Republican Rep. Judy Biggert at the House Financial Services Committee hearing. Some committee members said they support forming a congressional select committee to deal with the issue. "That's a reasonable idea," committee Chairman Barney Frank told reporters after the hearing. The Massachusetts Democrat also said he favors a moratorium on bonuses for executives of Wall Street firms. "There should be a moratorium on it, on bonuses, yes," he said. "They have a negative incentive effect because they are the ones that say, if you take a risk and it pays off you get a big bonus. But if it costs money, you don't lose anything." Perverse Incentives Frank said the moratorium should be in place until firms can devise new compensation schemes that eliminate the "perverse incentives" of the existing bonus system. The committee's hearing was the first of many to come, with Congress expected to tackle issues as broad as redefining what a bank is, and as specific as closing offshore tax shelters. Lawmakers at the hearing called for more disclosure by hedge funds and private equity firms, as well as more openness in markets for credit default swaps, one of the many complex financial instruments behind the global credit crunch. |
