The Ranking Member has talked about sort of looking into the regulatory practices of the Federal Reserve , particularly regulating these large institutions .
I was always skeptical with Gramm-Leach-Bliley about how you allegedly can have part of the bank holding company guaranteed , and there is not going to be any spillover on the unguaranteed parts .
With AIG and then the life companies asking for TARP money , I have had to ask myself , basically the safety net has now been extended so far and there is really no going back or constraining it .
I do think there was a general philosophy , maybe even to this day , that the Federal Reserve should not weigh against asset bubbles , that is not in their job description , so to speak .
And as Mr. Zandi said in his own testimony , if I understood it properly , suggesting that when we see a bubble in formation , obviously increasing capital requirements will maybe minimize how big that bubble gets .
This bill would transfer consumer protection and financial services from Federal banking regulators to one agency dedicated to consumer protection .
Under Chairman Alan Greenspan , the Federal Reserve Board failed to stop the mortgage crisis in thee crucial ways : First , the Federal Reserve was the only agency that could have stopped the race to the bottom .
Finally , to avoid any risk of future inaction by the new agency , the Act gives backup enforcement authority to the Fed and other Federal banking regulators in the States .
Finally , the last time the Fed did a major overhaul of its Truth in Lending Act mortgage disclosures was 28 years ago , in 1981 .
Mr. Garrett , '' You need someone to address situations , future asset bubbles , for dealing with being countercyclical as opposed to being procyclical ? ''
It might easily threaten the independence of the Federal Reserve in taking unpopular decisions to rein in the bubble economy .
These are different skills from regulation and I think putting an additional regulatory responsibility which they have historically not been very good at at the Fed would dilute their monetary policy focus .
Now , I grant you that the vast majority of the legislation should have been Federal in nature because the State-chartered institutions were few , and they were n't causing the problem .
It is obvious this could exert a very powerful , and possibly beneficial , damping influence on , for example , real estate price bubbles .
Would it ultimately be better to protect job loss or inflation down the road if we are able to -- it is not often popular , for instance , to do it , but is that going to make more sense than -- given the recent experience we have had recently , does that make more sense to look more in advance on that ? ''
I would give the Federal Reserve clear responsibility for Macro System Stability , reporting periodically to Congress and coordinating with a Financial System Oversight Council .
Although respect for the Fed 's monetary policy has grown in recent years , its regulatory role has diminished .
Even more important , a Macro System Stabilizer should have focused on why the lenders had such irresistible incentives to push mortgages on people unlikely to repay .
The aspect of the recent financial extravaganza that made it truly lethal was the overleveraged superstructure of complex derivatives erected on the shaky foundation of America 's housing prices .
This is not necessarily bad , but it could result in more Congressional interference with monetary policy , which could threaten the Fed 's effectiveness and credibility in containing inflation .
PREPARED STATEMENT OF ALICE M. RIVLIN Senior Fellow , Economic Studies , Brookings Institution July 23 , 2009 Mr. Chairman and Members of the Committee , I am happy to be back before this Committee to give my views on reducing systemic risk in financial services .
Bear Stearns and Lehman Brothers had no insured deposits and no claim on the resources of the Federal Reserve .
But it would have had to raise rates dramatically to slow the market 's upward momentum -- a move that conditions in the general economy did not justify .
However , we are concerned that , given recent regulatory statements and testimony , the imposition of mandatory margining for hedging transactions would still likely occur .
Point number two : A key aspect of the reform is establishing the Federal Reserve as a systemic risk regulator .
The third limitation is the reform proposal puts the Federal Reserve 's political independence at greater risk , given its larger role in the financial system .
Your plan puts a lot of faith in the Federal Reserve 's ability to spot risk and exercise its power to prevent the next crisis .
These are the areas I ask Congress to focus on going forward so that when economic conditions improve , institutions will return to the securitization markets .
In addition to the liquidity and valuation challenges , mark-to-market accounting has compounded the problems for the financial services industry .
Today 's hearing examines a different aspect of the Administration 's regulatory reform proposal , the proposed Consumer Financial Protection Agency -LRB- CFPA -RRB- .
The fact that the Federal Reserve regulates interest rates and gets them down to 1 or 2 percent , so if you happen to be a saver and you are in retirement and you put money away , you get punished .
This hearing is entitled , `` Regulatory Restructuring : Safeguarding Consumer Protection and the Role of the Federal Reserve . ''
No doubt we would all love to figure out a way to properly end systemic risk , but it kind of begs the question who , what , how , and at what cost ?
Mr. Lucas , '' Thank you , Mr. Chairman , and Ranking Member Garrett , for holding today 's hearing .