Capitol Hill
22 October 2008
Economic experts appearing at a congressional hearing have urged lawmakers to carry out substantial but carefully planned financial market and institutional reforms. A House of Representatives committee held an all-day hearing Tuesday on the subject, one of a series of examinations of the U.S. financial crisis. VOA Dan Robinson reports.
Majority Democrats have repeatedly underscored their intention to legislate major changes to impose greater regulation on financial markets when a new Congress convenes next year.
The hearing of the House Financial Services Committee covered numerous complex aspects of the sub-prime mortgage-based financial crisis, and the role played by complicated financial instruments.
Experts and lawmakers debated root causes, but agreed that further action is required. To accomplish that, Democrats and Republicans will have to agree on a way forward.
As of now, there is strong bipartisan agreement on the need to throughly examine how the crisis came about, to perform an autopsy as one lawmaker called it, as well as steps to ensure it does not recur.
Here are Pennsylvania Democrat Paul Kanjorski, and New Jersey Republican Scott Garrett:
KANJORSKI: "We have reached a crossroads. Because our current regulatory regime has failed we now must design a robust, effective, supervisory system for the future."
GARRETT: "It's important that we work in a bipartisan fashion to move forward to ensure that we put in place the property regulatory framework to allow our economy to grow again."
But there are differences in approach as many Republicans voice opposition to any future over-regulation of markets.
Alabama Republican Spencer Bachus, and Georgia's Tom Price:
BACHUS: "We need, I think number one, to realize there are limits on what government can do to intervene in this market process."
PRICE: "What is taking place is truly unprecedented. Direct federal intervention in individual mortgages, broad over-reach by the Federal Reserve, unlimited use of taxpayer dollars and steps to nationalize banks. These steps are in their totality, I fear, an assault on American principles and on capitalism itself."
Experts stressed that where financial market reform is concerned the question is not one of too much or too little, but the most effective way to carry it out.
Joseph Stiglitz, the 2001 Nobel economics prize laureate, is a strong proponent of an active government role:
"The de-regulatory philosophy that has prevailed during the past quarter century has no grounding in economic theory nor historical experience," said Joseph Stiglitz. "Quite the contrary, modern economic theory explains why the government must take an active role especially in regulating financial markets."
Key priorities, Stiglitz argues, should be broader reform of financial corporate governance, and protection for American homeowners as the U.S. economy slides deeper into recession.
Manuel Johnson, a noted financial accounting expert, argues for a cautious approach that would not, as he puts it, role back the gains made in the U.S. financial system:
"From my perspective, permanent government control over the credit allocation process is economically inefficient and potentially, even more unstable," said Manuel Johnson.
Joel Seligman of Columbia University says members of Congress must distinguish between emergency legislation, such as the more than $700-billion rescue package approved recently, and longer-term efforts. He urges lawmakers to organize and streamline their investigations:
"I would strongly urge each house of Congress to create a select committee similar to that employed after September 11th [2001], to provide a focused and less contentious review of what should be done," said Joel Seligman.
Economist Alice Rivlin urges lawmakers to, as she puts it, check their philosophical slogans at the door as they go to work on what she calls a difficult and painstaking job:
"Too many attempts to re-think regulation of financial markets in recent years have been de-railed by ideologues shouting that regulation is always bad or alternatively that we just need more of it," sid Alice Rivlin.
Tuesday's House hearing was one of several that congressional committees are holding on the financial crisis ahead of the U.S presidential election on November 4.