“People that made the mess should clean up the mess”

Talk of a new, improved stimulus package suggested by Ben Benarnke, Chairman of the Federal Reserve, indicates that more government spending is yet to come. “People that made the mess should clean up the mess,” said Congressman Steven C. LaTourette(R-Ohio) referring to the ongoing financial turmoil, as the House Financial Service Committee gathered today to discuss future financial regulations on financial institutions.

The hearing focused on the previous lack of proper regulatory systems applied to the markets, which now as several members of the Committee agreed on, is highly in need of reform. Congressman Paul E Kanjorski (D-Pa.) spoke of regulations in need of having the proper resources to be effective. He said U.S. needs to recognize the global market systems as wells as securing the average American’s economy.

Several members of the Committee commented on transparency as being an essential part of the reforming process saying it is necessary. Most attending representatives agreed on expanded regulations within the banking institutions. Still, some representative said further government involvement and control in the markets will in a long term perspective only lead to increased problems.

Congressman Scott Garrett (R-N.J.), claimed that the United States got into this situation due to past poor regulations, specifically considering Fannie Mae and Freddie Mac company. He underlined that Democrats have constantly been voting against expanding regulations. Chairman Barney Frank (D-Mass.) countered saying “I will acknowledge that during the 12 years of Republican rule… I was unable to stop them from impeaching from Bill Clinton … from irresponsible tax cuts, the war in Iraq and a patriot act that did not include civil liberties”.

Witness Dr. Joseph Stiglitz, professor at Columbia University New York, also highlighted the importance of transparency being included when reforming past regulations. “The non-transparency is a key part of the credit crisis that we have experienced in the recent weeks,” said Stiglitz. He believes simply applying capital injection into banking systems is not enough to get the banks nor the economy back on it’s feet. Instead Stiglitz suggested taxation on banking institutions. He highlighted that in the future United States need to find long term access to finance to prevent another economic crisis to occur.