Financial investment firms compared to “spoiled teenagers”

As far as Senator Chris Dodd (D-Conn.), Chairman of the Senate Banking, Housing and Urban Affairs Committee, is concerned, there must be a “heightened sense of urgency” about the enactment of the Emergency Economic Stabilization Act. At a full committee hearing on the turmoil in the United States credit markets, the committee heard from Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation; Neel Kashkari, interim assistant secretary for financial stability and assistant secretary for international affairs at the Treasury Department; Brian Montgomery, federal housing commissioner and assistant Housing and Urban Development secretary; Elizabeth Duke, member of the Federal Reserve Board of Governors; and James Lockhart III, director of the Federal Housing Finance Agency.

The opening statements included Senator Charles Schumer’s (D-N.Y.) comparison of the financial investment firms in question to “spoiled teenagers” who threw a house party while their parents were out of town. Schumer said the financial crisis was “not unforeseeable” and that the Treasury must issue guidelines for future banking endeavors now that taxpayer money is involved. Senator Bob Menendez (D-N.J.) believes that if 9800 Wall Street jobs were lost everyday, like they were lost for millions of Americans, the financial problem would have been solved long ago. He then stated that the “funds are not a gift” from taxpayers to banks and that must be made clear through oversight and compliance.

In her testimony, Chairwoman Sheila Bair advised the necessity to recapitalize banks in order to reverse the “confidence problem” happening in America. She said this recapitalization would be similar to that of European banks and would help in the area of liquidity. She also advised that to help homeowners, the FDIC would work with the Senate Banking Committee and Treasury Department to prevent future foreclosures and create sustainable mortgages. Neel Kashkari said that to help financial institutions, the Treasury Department had created seven policy programs including an equity purchase program, a homeownership preservation program, and an executive compensation program. Kashkari believes that the Treasury has “accomplished a great deal in a short period of time,” but stated that it may not be until the end of the year before the $250 billion is allocated to chosen banks.