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Posts Tagged ‘Senate Banking Committee’

Fed Chair Testifies About Financial Markets and Economy at Senate Confirmation Hearing

Posted by HH on December 4, 2009

Enclosed below is the testimony of Federal Reserve System Board of Governors Chairman Ben Bernanke at his confirmation hearing before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C. on December 3, 2009.  Bernanke was nominated for a second term as chairmen by President Obama.

Chairman Dodd, Senator Shelby, and members of the Committee, I thank you for the opportunity to appear before you today. I would also like to express my gratitude to President Obama for nominating me to a second term as Chairman of the Board of Governors of the Federal Reserve System and for his support for a strong and independent Federal Reserve. Finally, I thank my colleagues throughout the Federal Reserve System for the remarkable resourcefulness, dedication, and stamina they have demonstrated over the past two years under extremely trying conditions. They have never lost sight of the importance of the work of the Federal Reserve for the economic well-being of all Americans.

Ben Bernanke

Over the past two years, our nation, indeed the world, has endured the most severe financial crisis since the Great Depression, a crisis which in turn triggered a sharp contraction in global economic activity. Today, most indicators suggest that financial markets are stabilizing and that the economy is emerging from the recession. Yet our task is far from complete. Far too many Americans are without jobs, and unemployment could remain high for some time even if, as we anticipate, moderate economic growth continues. The Federal Reserve remains committed to its mission to help restore prosperity and to stimulate job creation while preserving price stability. If I am confirmed, I will work to the utmost of my abilities in the pursuit of those objectives.

As severe as the effects of the crisis have been, however, the outcome could have been markedly worse without the strong actions taken by the Congress, the Treasury Department, the Federal Reserve, the Federal Deposit Insurance Corporation, and other authorities both here and abroad. For our part, the Federal Reserve cut interest rates early and aggressively, reducing our target for the federal funds rate to nearly zero. We played a central role in efforts to quell the financial turmoil, for example, through our joint efforts with other agencies and foreign authorities to avert a collapse of the global banking system last fall; by ensuring financial institutions adequate access to short-term funding when private funding sources dried up; and through our leadership of the comprehensive assessment of large U.S. banks conducted this past spring, an exercise that significantly increased public confidence in the banking system. We also created targeted lending programs that have helped to restart the flow of credit in a number of critical markets, including the commercial paper market and the market for securities backed by loans to households and small businesses. Indeed, we estimate that one of the targeted programs–the Term Asset-Backed Securities Loan Facility–has thus far helped finance 3.3 million loans to households (excluding credit card accounts), more than 100 million credit card accounts, 480,000 loans to small businesses, and 100,000 loans to larger businesses. And our purchases of longer-term securities have provided support to private credit markets and helped to reduce longer-term interest rates, such as mortgage rates. Taken together, the Federal Reserve’s actions have contributed substantially to the significant improvement in financial conditions and to what now appear to be the beginnings of a turnaround in both the U.S. and foreign economies.  To read the rest of the tesimony click here.

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Legislation Unveiled to Reform U.S. Financial System

Posted by HH on November 10, 2009

Senate Banking Committee Chairman Chris Dodd (D-CT) joined by fellow committee members Jack Reed (D-RI), Charles E. Schumer (D-NY), Robert Menendez (D-NJ), Daniel K. Akaka (D-HI), Jon Tester (D-MT), Mark Warner (D-VA), Jeff Merkley (D-OR) and Michael Bennet (D-CO) unveiled a bill today to reform the way that our financial system is regulated.  Enclosed below is a summary of the highlights of the bill provided by the press office of the Senate Banking Committee.


Senator Christopher Dodd

Summary: Restoring American Financial Stability – Discussion Draft


Consumer Financial Protection Agency: Creates an independent watchdog to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, while prohibiting hidden fees, abusive terms, and deceptive practices.

Ends Too Big to Fail: Prevents excessively large or complex financial companies from bringing down the economy by: creating a safe way to shut them down if they fail; imposing tough new capital and leverage requirements and requiring they write their own “funeral plans”; requiring industry to provide their own capital injections; updating the Fed’s lender of last resort authority to allow system-wide support but not prop up individual institutions; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.

Protects Against Systemic Risks: Creates an independent agency with a board of regulators to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the financial system. The agency could require companies that threaten the economy to divest some of their holdings.

Single Federal Bank Regulator: Eliminates the convoluted system of multiple federal bank regulators to increase accountability and end unnecessary overlap, conflicting regulation, and “charter shopping;” keeps in place the healthy dual banking system that governs community banks.

Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and director nominations.

Closes Loopholes in Regulation: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated – including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.

Protects Investors: Provides tough new rules for transparency and accountability from investment advisors, financial brokers and credit rating agencies to protect investors and businesses.

Enforces Regulations on the Books: Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefit special interests at the expense of American families and businesses.

For more information on the proposed legislation click here.

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Treasury Secretary Unveils Obama Administration’s Financial Stability Plan for Small Business Lending, Consumer Lending, and Mortgage Lending to Senate Banking Committee

Posted by HH on February 10, 2009

U.S. Treasury Secretary Timothy Geithner outlined the Obama Administration’s plans to address the credit crisis to the Senate Banking Committee on February 10.  Enclosed below are the opening remarks.

Chairman Dodd, Ranking Member Shelby, and Members of the Committee:  thank you for inviting me to be here today.

This morning, as the Senate continues its work on an economic recovery plan to help create jobs and lay a foundation for stronger economic future, I announced our Administration’s plan to restart the flow of credit, strengthen our financial system, and provide critical aid for homeowners and for small businesses.

Right now, job losses are accelerating and credit has slowed to a trickle.  On top of the financial and economic challenges we face… there is another; a lack of faith.

U.S. Treasury Secretary Timothy Geithner

U.S. Treasury Secretary Timothy Geithner

The American people have lost faith in the leaders of our financial institutions, and are skeptical that their government has – to this point — used taxpayers’ money in ways that will benefit them.

Together we can change this.

To get credit flowing again, to restore confidence in our markets, and restore the faith of the American people, we have proposed a fundamental reshaping of the government’s program to repair the financial system.

It all begins with transparency.  We propose to establish a new framework of oversight and governance of all aspects of our Financial Stability Plan.  The American people will be able to see where their tax dollars are going and the return on their government’s investment. They will be able to see whether the conditions placed on banks and institutions are being met and enforced. They will be able to see whether boards of directors are being responsible with taxpayer dollars and how they’re compensating their executives. And they will be able to see how these actions are impacting the overall flow of lending and the cost of borrowing.

These new requirements, which will be available on a new website, will give the American people the transparency they deserve.

Second, we are going to bring together the government agencies with authority over our nation’s major banks and initiate a more consistent, realistic, and forward looking assessment about the risk on balance sheets.  We’re calling it a financial “stress test.”  We want banks’ balance sheets cleaner, and stronger.  And we are going to help this process by providing a new program of capital support for those institutions  that need it.

Institutions that need additional capital will be able to access a new funding mechanism that uses money from the Treasury as a bridge to private capital.  The capital will come with conditions to help ensure that every dollar of assistance is used to generate a level of lending greater than what would have been possible in the absence of government support.

Third, together with the Fed, the FDIC, and the private sector, we propose the establishment of a Public-Private Investment Fund.  This program will provide government capital and government financing to help leverage private capital and get private markets working again.  This fund will be targeted to the legacy loans and assets that are now burdening many financial institutions.

By providing the financing the private markets cannot now provide, this will help start a market for the real estate-related assets that are at the center of this crisis.  Our objective is to use private capital and private asset managers to help provide a market mechanism for valuing the assets.

We are exploring a range of different structures for this program, and will seek input from this Committee as we design it.

Fourth, working jointly with the Federal Reserve, we are prepared to commit up to a trillion dollars to support a Consumer and Business Lending Initiative.  This initiative will kick start the secondary lending markets, to bring down borrowing costs, and to help get credit flowing again.

In our financial system, 40 percent of consumer lending has historically been available because people buy loans, put them together and sell them.  Because this vital source of lending has frozen up, no financial recovery plan will be successful unless it helps restart securitization markets for sound loans made to consumers and businesses – large and small.

This lending program will be built on the Federal Reserve’s Term Asset Backed Securities Loan Facility, announced last November, with capital from the Treasury and financing from the Federal Reserve.

And because small businesses are so important to our economy, we’re going to take additional steps to make it easier for them to get credit from community banks and large banks.

Fifth, we will launch a comprehensive housing program. Just as the name of this Committee makes a link between banking and housing, so must our efforts to strengthen the financial system.

The President has asked his economic team to come together with a comprehensive plan to address the housing crisis.  We will announce the details of this plan in the next few weeks.

Our focus will be on using the full resources of the government to help prevent avoidable foreclosures and to reduce mortgage interest rates.  We will do this with a substantial commitment of resources already authorized by the Congress under the Emergency Economic Stabilization Act.  We welcome the ideas and input of this Committee in this important effort.

And finally, President Obama is committed to moving quickly to reform our entire system of financial regulation so that we never again face a crisis of this severity.  And, again, that effort can only succeed with the collaboration and support of this Committee and other Members of Congress.

Let me close by saying that our challenges in this financial crisis are more complex than any our financial system has ever faced, requiring new programs and persistent attention to solve.  But the President, the Treasury, and the entire Administration are committed to working with you to see it through because we know how directly the future of our economy depends on it.

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