MR. WARSH
Not only has the Senior Loan Officer Opinion Survey continued to be disappointing , large money center banks appear to be pulling back from some segments of the small business markets entirely .
MR. EVANS
So when thinking about market functioning , it would be useful to discuss this within a longer-term framework of what we can feasibly expect from market functioning and what central bank liquidity has the ability to usefully and appropriately influence .
On September 6 , 2008 , the Treasury and Federal Housing Finance Agency -LRB- FHFA -RRB- placed Fannie Mae and Freddie Mac into conservatorship , administered by the FHFA .
When the FDIC proposed the Home Ownership Preservation -LRB- HOP -RRB- Loan program in May 2008 , we noted that congressional action would be required to authorize the Treasury Department to make HOP loans .
MR. COVITZ
Yields also fell following Fed communications regarding alternative monetary policy tools , such as the purchase of long-term Treasury securities , agency debt , and mortgage-backed securities .
What protections should be considered to address these problems in connection with any investments by the Treasury Department in Freddie and Fannie?A .3 .
The Federal Reserve can not bear the sole responsibility for responding to the kind of challenges that the United States is going through .
Chairman Bair has led the charge on this front , and the rest of the regulators and Treasury should follow her lead .
Thank you , Chairman Dodd , for holding this important hearing to focus on the financial crisis and the administration 's response .
Reform is important , of course , because a strong and resilient financial system is integral to the economic performance of any economy .
MR. WARSH
Financial markets have been testing financial institutions with weaker capital structures , uncertain management teams , and unsustainable business models .
While this would involve investing only a relatively modest share of TARP funds in the Federal Reserve liquidity facility , it could have substantial positive benefits for consumer lending .
Recently , at critical moments and on critical issues , the SEC has been reactive at best or has shown no real willingness to stand up for investors .
Therefore , Treasury committed to provide $ 20 billion of TARP resources in support of a $ 200 billion Federal Reserve facility -- the Term Asset-Backed Securities Loan Facility -LRB- TALF -RRB- .
Specifically , Treasury has achieved the following three key accomplishments : To support the housing and mortgage market , Treasury acted earlier this year to prevent the failure of Fannie Mae and Freddie Mac , the housing GSEs that affect over 70 percent of mortgage originations .
The Senior Preferred Stock Purchase Agreements signed between the Enterprises and Treasury ensure consultation or agreement with the Treasury on many aspects of the Enterprises activities .
Given such market conditions , Secretary Paulson and Chairman Bernanke recognized that Treasury needed to use the authority and flexibility granted under the EESA as aggressively as possible to help stabilize the financial system .
The EESA created the Financial Stability Oversight Board , which includes the same members as the FHFA Oversight Board plus the Federal Reserve Chairman .
And Chairman Bernanke , the Federal Reserve 's actions continue to help preserve confidence and bring stability to our financial markets and institutions .
In this regard , the Federal Reserve supports the Treasury 's proposal to buy illiquid assets from financial institutions .
Despite the efforts of the Federal Reserve , the Treasury , and other agencies , global financial markets remain under extraordinary stress .
MR. WARSH
Financial institution equity prices showed significant underperformance , and some people say that is the Federal Reserve 's fault .
The Treasury 's original plan to buy impaired loans as a way of cleaning the bank 's balance sheet simply could n't work .
Working with the Treasury , the FDIC , and other agencies , the Federal Reserve believes that we must take all steps necessary to minimize systemic risk .
An example is the Term Asset-Backed Securities Loan Facility , which calls for an equity investment by the Treasury Department and credit provided by the Federal Reserve .
Indeed , consistent with that intent , the Federal Reserve has , since 2006 , published a separate rate series for asset-backed commercial paper .
In many cases such consultations have been organized by Treasury Department and have included a wide range of government agencies .
As provided in the Act , the Federal Reserve Board and its staff are consulting with Treasury regarding the TARP and Chairman Bernanke serves as Chairman of the Oversight Board for TARP .
In addition , the Federal Reserve System is strategically utilizing its presence around the country through its regional Federal Reserve Banks and their branches to address foreclosures .
Mr. Chairman , we gather here today at a time of the most palpable sense of national crisis since we gathered here in this building immediately following the 9/11 attacks .
MR. WARSH
I think Art talked rightly about these different regulatory frameworks for the big money center commercial banks and the investment banks .
MR. WARSH
We 'd be doing ourselves a disservice over the period , Mr. Chairman , to take the regulatory regime that we have now had for a long time for these big complex commercial banks and try to put it on the investment banks .
In late 2007 , Mr. Erik Sirri , head of Market Regulation for the Securities and Exchange Commission , described a consolidated supervision program that had `` demonstrated its effectiveness during the current credit market difficulties . ''
This is why Treasury and the New York Federal Reserve Bank had to develop a process for the Lehman Brothers and AIGs of the world , because the process for it right now just does not exist .
MR. ANGULO
403 , MR. ANGULO. , '' The top panel of exhibit 12 sets forth the question we sought to address -- namely , to what extent did regulatory incentives contribute to or fail to mitigate weaknesses exposed by the recent turmoil ?