Network News

X My Profile
View More Activity

Hearing Offers Solutions for 'Too Big to Fail' Problem

Rep.Carolyn B. Maloney, chair of Joint Economic Committee, filed this guest blog post:

Today’s Joint Economic Committee hearing provided a unique opportunity to hear more information about solutions to the “too big to fail” problem from a group of distinguished panelists from across the political spectrum who were in surprising agreement on the problem and the solutions we need to adopt. The panel unanimously supported expanding the current mechanism for resolving insolvency in financial institutions – receivership by the Federal Deposit Insurance Corp., as the Obama administration has proposed.

The panelists all conveyed a sense of urgency that the federal government be given this resolution authority as quickly as possible – the cost to taxpayers would be too high otherwise. The only real question is why former Treasury Secretary Henry Paulson didn’t ask for this authority in March of 2008, when Bear Stearns collapsed.

While our panelists were generally supportive of the proposed Treasury legislation, professor Simon Johnson noted that we should consider including certain protections for workers that are in the bankruptcy code.

The witnesses also raised and were supportive of the need for new prohibitions against predatory practices in financial services, such as large credit card fees or changes in interest rates on existing balances, or exorbitant fees on checking and savings accounts. The Credit Card Bill of Rights, a bill that I introduced, addresses many of these issues and is being voted on the Financial Services Committee tomorrow.

Professor Joseph Stiglitz made a compelling case that we underestimate the positive impact of removing these kinds of predatory practices by only looking at potential reductions in the supply of credit when these practices are prohibited. As he noted, reducing fees and eliminating predatory practices will encourage creditworthy consumers to borrow and to buy goods and services, which will help the economy recover from the current downturn.

The panel also unanimously supported the notion of a Financial Services Product Safety Commission to oversee the safety and soundness of financial products. And I agree, although I believe that it should be located in New York, where there is a concentration of experts on financial services.

--Rep.Carolyn B. Maloney (D-N.Y.), chair of Joint Economic Committee

By Sara Goo  |  April 21, 2009; 8:12 PM ET
 
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Geithner's Prepared Testimony on TARP
Next: Timothy Geithner Doesn't Get It

Comments

There is a matter of principle about where government agencies should be located. Many financial experts are in New York City, no doubt. But the representatives of "We The People" of the USA are in Washington, not in New York. So the question becomes: should the plutocrats in New York be close and personal with the agency in charge of reining them in, or should the People of the USA be close and personal to its own agency? Who ought to be in charge? The plutocrats who caused the crisis, or the People, who pay for the crisis?

If unhappy about how long it takes to go from New York to Washington, please notice that the French AGV, a train, covers such a distance in exactly one hour in standard operations. It may give a lot of useful work to a lot of Americans to build such a high speed line. Besides the USA would gain know-how by transferring this advanced technology.

Patrice Ayme

Posted by: PatriceAyme | April 22, 2009 6:06 AM | Report abuse

This was a splendid hearing, featuring well-informed and diverse witnesses, and excellent questions from Rep. Maloney, Sen. Brownback, and all the other Committee members. Throughout its history, the JEC has hosted hearings that have proved vital to our nation's economic interests and it's thrilling to see this tradition continued under Rep. Maloney's leadership.

With all due respect, I would agree with Ms. Maloney's take on the hearing, except in one regard. While all the witnesses agreed in their support for Treasury's determination to resolve the banking crisis we face, none struck me as particularly supportive of the particular approach Treasury appears to be pursuing at the moment. Indeed, these witnesses seemed to me united in their skepticism that the current Treasury approach would work at all. Just my 2 cents...

Posted by: e-veblen | April 22, 2009 4:32 PM | Report abuse

I find that I am extremely frustrated by my inability to gather information on each aspect of the financial crisis in a structured fashion. There seems to be an unwillingness on the part of government or private responsible individuals to make available the following information for EACH program:
1) What is the justification for the program?
2) Who is in charge of the specific program? (Example: TARP)
3) Where can I find a summary of the law that is intelligible to the non- specialist?
4) What action has been taken from the inception of the program up to date and by whom?
5) Who are the recipients of the funds? If the names of recipients are not available, the reasons why this is so;
6) What results have been obtained to-date?
7) What actions are contemplated in the near future in the light of the results obtained so far (congressional hearings etc)?
8) There should be opportunity for each congressman or congresswoman or senator to provide comments for each program as to its validity or invalidity;
9)Each program should have its own web site and the web site should be structured along the lines suggested above.
--------------
More generally, the information should meet high standards of logic, internal consistency and accuracy.
This could be achieved by making a knowledgeable and independent person responsible for the high quality of the web site.

Posted by: ad1925 | April 25, 2009 10:40 PM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company