Anne Vorce, director of the New America Foundation’s Fiscal Roadmap Project, says she thinks that the financial reform plan proposed by Sen. Chris Dodd (D-Conn.) “goes too far.” (0:38)
By Meagan Wiseley – University of New Mexico/Talk Radio News Service
Chairman of the House Financial Services Committee Barney Frank (D-Mass.) said Friday that on the economic front, America received good news and bad news today following the Labor Department’s announcement of a 10.2% unemployment rate.
“Although 190,000 more American’s lost their jobs…that is substantially less than the pace at which they were losing jobs until fairly recently,” Frank said during remarks at a conference sponsored by NoLimits.org, a progressive on-line organization founded by Frank’s sister.
Frank said the American Recovery and Reinvestment Act, or the stimulus bill, had a positive impact in deterring unemployment, explaining that unemployment rates would be higher if the stimulus bill hadn’t passed.
Frank also said that the lack of regulation in the financial sector, which he contributed to Alan Greenspan, the former Chairman of the Federal Reserve, led to the AIG crisis and the following recession. He praised the current Chairman of the Federal Reserve Ben Bernanke for his willingness to collaborate with Congress over new financial regulatory reforms.
Frank remained positive about the economic outlook.
“We are making progress … things are getting better virtually on every front [and] I am confident that when we are through with financial regulations…the kind of things that got us in trouble in the past won’t get us in trouble in the future,” Frank added.
World Bank Group President Robert Zoellick says “It should not be a surprise that American democracy is hesitating about authorizing the Fed to supervise systemic banking risks as well as operate monetary policy, adding to its power.” (0:12)
Regarding the Federal Reserve’s power, World Bank Groups President Robert Zoellick asks, “Will democratic governments permit independent central banks to assume even more authority?” Zoellick adds that “Congress felt surprised about the Federal Reserve’s authority to create funds, buy assets, devise global swap lines and make transactions outside the usual process for expending public monies.” (00:13)
Rep. Ron Paul (R-Texas) says more oversight, not secrecy is what the Federal Reserve needs. :16
Rep. Ron Paul (R- Texas) says the Federal Reserve is no longer fulfilling the role it was created to fill, so he believes the entity needs government oversight. :34
Federal Reserve Board of Governors General Counsel Scott Alvarez says that if Rep. Ron Paul’s (R- Texas) H.R. 1207 proposal is enacted, the public would lose confidence in the Fed’s ability to control interest rates and monetary policies. :44
by Julianne LaJeunesse- University of New Mexico
Should the Federal Reserve Committee be regulated by the Government Accountability Office? U.S. Representative Ron Paul (R-Texas) says yes, and Scott G. Alvarez of the Federal Reserve says no.
Paul is the sponsor of H.R. 1207, which calls for audits on the Federal Reserve, a quasi-public entity that in theory can control the nation’s money supply, set interest rates, and implement monetary policy.
At a Friday hearing, Paul said the Fed needs GAO oversight because they aren’t doing their job correctly.
“The Federal Reserve was designed, and their mandate was to make sure that we have full employment, price stability, and stable interest rates,” Paul said. “In my lifetime, interest rates have been 21 percent and less than one percent- so they fail there. They [the Fed] want a stable dollar and stable prices… well, we have continuous inflation.”
Paul said it’s Congress’ responsibility to make sure the Fed does what it was created for and not buy into the idea that the Fed needs more power and more secrecy.
Fed Board of Governors General Counselor Scott G. Alvarez argued before Paul, Chairman Barney Frank (D-Mass.), and other members of the House Financial Services Committee, saying that Fed autonomy is instrumental in safeguarding U.S. interest rates, but also that an independent Fed is a nonpolitical Fed.
Alvarez said from an economic stance, GAO regulation would hinder Fed access to and implementation of some programs.
“If it looks like the Federal Reserve is changing directions because a statement [of] the policy review by another agency is influencing the Federal Reserve’s decision… then the integrity of the process will be undermined, confidence that the Federal Reserve will move in the direction that is best for the economy will be undermined, and we won’t be able to carry out our job as well,” Alvarez said. “And that’s what we’re concerned about.”
Alvarez said the Fed has taken many steps to increase transparency since the 2008 bank bailouts, but when Rep. Emanuel Cleaver II (D- Mo.) asked him about the misinterpretation between Congress and the Treasury Department and the Federal Reserve, as far as Troubled Assets Relief Program allocations, Alvarez said the latter departments decided to use the funds to restore confidence to banking institution, a decision Cleaver said was not immediately apparent when TARP was passed.
Treasury Secretary Timothy Geithner explains why the newly proposed Consumer Financial Protection Agency must have the authority to both write and enforce rules for consumer protection. (0:33).
By Sam Wechsler – Talk Radio News Service
Secretary of the Treasury Timothy Geithner expressed support for the newly proposed Consumer Financial Protection Agency (CFPA) Friday at a hearing before the House Financial Services Committee. If established, the new agency would both regulate and enforce rules geared towards protecting consumers from risky financial products.
Geithner stated that “rules written by those not responsible for enforcing them are likely to be poorly designed, with insufficient feel for the needs of consumers and for the realities of the market. Rule-writing authority without enforcement authority would risk creating an agency that is too weak, dominated by those with enforcement authority.”
Oversight of the CFPA would extend to both banks and non-banking financial institutions such as mortgage brokers.
Geithner said that consumer protection failed in the years leading up to the current financial crisis in part because all federal financial regulators had higher priorities than consumer protection. Creation of the new agency would strip the Federal Reserve of consumer protection authority, and would require the Fed to receive written authority from the Secretary of the Treasury in order to exercise emergency lending authority.
Geithner stressed his desire to see innovation maintained in the financial product industry, and called for a system that produces less risk for damage. “Many of the practices of consumer lending that led to this crisis gave innovation a bad name. What [lenders] claim was innovation was often just predation,” he said.
In addition to the new CFPA, Geithner discussed a Financial Services Oversight Council that would be comprised of the heads of all major financial regulatory agencies, including the Fed and the Securities and Exchange Commission. The council would have the power to gather information from any firm or market to help identify risk, and would be responsible for recommending changes in laws and regulation that would safeguard against future crises.
Geithner hopes that Congress will pass financial reform by the end of the year. “Despite this crisis, the United States remains in many ways the most productive, the most innovative, the most resilient economy in the world. To preserve this, though, we need a more stable, more resilient system, and this requires fundamental reform,” he said.
