CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt Systemic risk may arise from excessively large concentrations of risk on the books of a financial institution or a group of firms . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt The NIF would have two key organizational components : the Federal Financial Data Center -LRB- Data Center -RRB- and the Federal Financial Research and Analysis Center -LRB- Research Center -RRB- . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt To stave off the consequences of a failure to those already fragile firms doing business with AIG , the Federal Government committed to put almost $ 200 billion in capital into AIG . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt He reported consistently high earnings based on a purported complex trading strategy that made ample use of derivative transactions . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt The Research Center will be responsible for conducting , coordinating and sponsoring the long-term research needed to support systemic risk regulation . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt AIG had written $ 441 billion in CDSs -- linked to Private Label Mortgage Backed Securities -LRB- PLMBSs -RRB- . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt The primary objective of the CE-NIF is to seek the passage of legislation to create a National Institute of Finance -LRB- NIF -RRB- . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt An Independent Voice : It is critical that the NIF have the ability and responsibility to report its findings in a fully independent manner . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--45.txt Morgan Stanley estimates that implementation of the NIF will result in 20 percent to 30 percent savings in operational costs . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--137.txt As Senator Schumer 's example at Tuesday 's hearing illustrates , 50 small but highly correlated hedge funds might combine to create systemic risk . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--137.txt --------------------------------------------------------------------------- \ 1 \ This report contains 57 recommendations for making the U.S. financial regulatory structure more integrated , more effective and more protective of investors . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--137.txt This will also require that Federal regulators be given enhanced resolution authority , as set forth in H.R. 4173 and Senator Dodd 's Discussion Draft . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--137.txt Goldman Sachs , one of AIG 's major counterparties , has stated that it had adequate cash collateral to survive an AIG default . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--137.txt -- The losses at the center of the financial crisis mainly resulted from the credit , lending , and securitization functions of U.S. banks . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--10.txt Mr. Bernanke , '' The Federal Reserve 's involvement in regulation and supervision confers two broad sets of benefits to the country . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--10.txt The Federal Reserve strongly supports ongoing efforts in the Congress to reform financial regulation and to close existing gaps in the regulatory framework . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--10.txt For example , Federal Reserve staff members have expertise in macroeconomic forecasting for the making of monetary policy , which is important for helping to identify economic risks to institutions and to markets . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56776/CHRG-111hhrg56776--10.txt The Federal Reserve has developed such expertise in its long experience supervising banks of all sizes , including community banks and regional banks . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--248.txt Securities underwriting and sales is the one area that you will most certainly not hear President Obama or Bill Donaldson or Chairman Volcker or HFS Committee Chairman Barney Frank mention . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--248.txt Indeed , the dirty little secret that nobody dares to explore in the AIG mess is that the Federal bailout represents the complete failure of state-law regulation of the U.S. insurance industry . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--248.txt The lesson to take from the Volcker-Corrigan relationship is do n't look for any reform proposals out of Chairman Volcker that will truly inconvenience the large , TBTF dealer banks . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--248.txt If you accept that situations such as AIG and other cases where Buy Side investors -LRB- and , indirectly , the U.S. taxpayer -RRB- were defrauded through the use of OTC derivatives and/or structured assets as the archetype `` problems '' that require a public policy response , then the Volcker Rule does not address the problem . CongressionalHearings/Dodd-Frank/CHRG-111shrg57709/CHRG-111shrg57709--248.txt Volcker 's protege , never forget , was E. Gerald Corrigan , former President of the Federal Reserve Bank of New York and the intellectual author of the `` Too Big To Fail '' -LRB- TBTF -RRB- doctrine for large banks and the related economist nonsense of `` systemic risk . '' CongressionalHearings/Dodd-Frank/CHRG-111hhrg56767/CHRG-111hhrg56767--44.txt In October , we proposed supervisory guidance on incentive compensation practices that would apply to all banking organizations that the Federal Reserve supervises . CongressionalHearings/Dodd-Frank/CHRG-111hhrg56767/CHRG-111hhrg56767--44.txt This committee 's efforts in developing and passing H.R. 4173 will promote the uniform application of sound incentive compensation principles across large financial firms beyond those supervised by the Federal Reserve . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--43.txt The Federal Reserve has made large investments in quantitative and qualitative analysis of the U.S. economy , financial markets , and financial institutions . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--43.txt Additional benefits would result from making data public to the degree consistent with protecting firm-specific proprietary and supervisory information . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--43.txt The content of the reporting forms is coordinated by the Federal Financial Institutions Examination Council , which includes representatives of both state and Federal bank regulatory agencies . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--43.txt Protecting privacy and private-sector property rights clearly are important policy objectives ; they are important considerations in the Federal Reserve 's current data collection and safeguarding . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--43.txt While considerable steps have been made in the wake of the financial crisis , the Federal Reserve intends to do a good deal more . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--43.txt They also create systems with private identifiers for securities and firms or proprietary formats that do not make it easy to link with other systems . CongressionalHearings/Dodd-Frank/CHRG-111shrg57923/CHRG-111shrg57923--43.txt As the nation 's central bank , the Federal Reserve assesses and forecasts the U.S. and global economies using a wide variety of data and analytical tools , some based on specific sectors and others on large-scale models . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--132.txt As I see it , client-driven market making and the hedging and risk management activities growing out of such market making are natural activities of banks and Bank Holding Companies . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--132.txt Thus , great care must be used in the design of the approach to law and regulation for a system of Enhanced Resolution Authority . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--132.txt A less extreme , but still transformational structural change has been suggested by Chairman Volcker and endorsed by President Obama . CongressionalHearings/Dodd-Frank/CHRG-111shrg61651/CHRG-111shrg61651--132.txt That is why at Goldman Sachs -LRB- and other large integrated intermediaries -RRB- conflict management policies and procedures are constantly evolving and improving .