Fed Says Financial System Needs Overhaul

New Powers Needed To Prevent Widespread Economic Damage In Event Of Wall Street Collapse

(CBS/ AP)  Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told Congress Thursday that new regulatory powers are needed to insulate the national economy from damage if a big Wall Street firm collapses.

After years in which the Bush administration stressed deregulation and free markets, its top financial officials told Congress they agree what's needed now is a lot more power for regulators to get control over the markets, and, as CBS Radio's Bob Fuss reports -- step in when needed.

Paulson said things changed with the near collapse of the Wall Street firm Bear Sterns. He and Bernanke agree they need more coordinated control and plans on what to do next time a major bank or investment company starts teetering, Fuss reports.

Their recommendations were part of a broader debate before the House Financial Services Committee about the best ways to revamp the country's antiquated regulatory system. The idea is to brace the system to better respond to modern-day crises like the housing and credit debacles that have badly bruised the economy.

Both Bernanke and Paulson endorsed creating new procedures by which the government can guide an orderly liquidation of a failing investment bank in an effort to minimize any fallout that might be inflicted on the broader financial system and the overall economy. Such procedures, which are in place for commercial banks, might have made the dissolution of Bear Stearns more orderly.

"In light of the Bear Stearns episode, Congress may wish to consider whether new tools are needed for ensuring an orderly liquidation of a systemically important securities firm that is on the verge of bankruptcy, together with a more formal process for deciding when to use those tools," Bernanke said.

Paulson, who recently laid out such a proposal, said: "It is clear that some institutions, if they fail, can have a systemic impact." However, financial players need to be disciplined in managing risk and not expect the government to fly to their rescue, he added. "For market discipline to effectively constrain risk, financial institution must be allowed to fail," he said.

The Fed's financial backing of JPMorgan Chase's takeover of the troubled Bear Stearns has drawn criticism from Democrats, who call it a government bailout that could put billions of taxpayer dollars at risk.

The Treasury chief also sought Thursday to calm investor jitters about the financial health of mortgage giants, Fannie Mae and Freddie Mac. They are "working through this challenging period," Paulson told Congress. "Their regulator has made clear that they are adequately capitalized."

Shares of Fannie and Freddie tumbled on Monday after a Lehman Brothers report said that an accounting change could force the companies to raise billions in new capital. That sent a tremor through financial markets.

Bernanke in recent days has called for stronger oversight of big Wall Street firms, which are regulated by the Securities and Exchange Commission. Those firms have been given unprecedented - albeit temporary - access to tap the Fed for emergency loans, a privilege that has been granted for years to commercial banks, which are more tightly regulated.

With credit problems persisting, the Fed may extend the lending privilege to investment banks into next year, Bernanke has said.

The Fed chief called on Congress to consider giving the central bank explicit authority to oversee systems that process payments and other financial transactions by investment firms as well as banks.

And, he recommended that Congress give a regulator the authority to set standards for capital, liquidity holdings and risk management practices for the holding companies of the major investment banks. Currently, the Securities and Exchange Commission's oversight of these holding companies is based on a voluntary agreement between the SEC and those firms.

"The financial turmoil that began last summer has impeded the ability of the financial system to perform its normal functions and adversely affected the broader economy," Bernanke said. "This experience indicates a clear need for careful attention to financial regulation and stability by the Congress and other policymakers."

The Fed, which regulates banks, and the SEC, which oversees investment firms, announced an information-sharing agreement on Monday aimed at better detecting potential risks to the financial system. With the Fed lending money to Wall Street firms, it needs to have a firm grasp of their financial shape.

Paulson has put forward an ambitious overhaul that would turn the Fed into a super cop in charge of financial market stability. But the plan would remove the Fed from day-to-day banking supervision, which Bernanke opposes.

No action is expected this year on such a regulatory overhaul and the debate is likely to spill over to the next president and the next Congress.

However, the sudden demise of the once mighty Bear Stearns, which was forced to the edge of bankruptcy after a run on the investment bank, underscored how quickly fortunes can change and raised new questions about the effectiveness of the regulatory system.

[kofiananimus]

funny how the GOP (or at least the libertarian sect) always says we need to de-regulate everything. I guess they want a big stinking mess.

[Gary Kempf]

Bernanke in recent days has called for stronger oversight of big Wall Street firms, which are regulated by the Securities and Exchange Commission. Those firms have been given unprecedented - albeit temporary - access to tap the Fed for emergency loans,

Excuse me, 17 times at 75 million is temporary?????

[jamjholmes]

The federal reserve is not federal, it is 5 private banks who are not elected. They pull the strings, the 2 corporate candidates, McInsane and Hussein O"bama are their puppets. They chose them not u. TV TELLS U and u think they respond to it and represent u. WAKE UP. Our media is comprised of 5 corporations who are incredibly biased. Learn up via the net, sheep.

[six-six-seis]

Life in Prison for these crooks would go a looon way.
mandatory forfeiture of profits and property,
life without parole....

[johnpatrick9]

The People are considered ignorant serfs by the hypocritical republican oligarchy..wasting our blood and our wealth and then sending us the bill. Prometheus 41 is so right these republican *** have set up a welfare state for themselves. Time to run them out of town on a rail...tarred and feathered.

[boatdocster]

Does the FED need an overhaul?

Not sure I agree with that, but the current White House surely needs an overhaul.

Seems strange that the FED worked fine until the Lil'' Bush and Sleezy ***** showed up.

[mcv57]

This is a public confession that our government had lost control over the financial institutions in this country. Monopoly capatialism has crippled this economy, and socialism is required for any type of recovery.

Alas, democracy has been comprised by greed, but as with Socialism, Communism or Dictatorship they will fail also. Man cannot solve his own problems because he is not God.

When the Jews wanted a King of flesh to see and touch, God responded with warning of the nature of man and corruption. Nevertheless, the prophet Daniel elected King David - who committed adultery, murdered, and enforced deadly schemes to insure his secession (altered the Torah through political means).

[walt1944-2009]

The "Head of the Fed" has told Congress that markets need a LOT MORE regulation from the government instead of doing whatever they want and making huge profits from it, as encouraged by the administration of the Great Emperor Bush II for the past 8 years.

Naturally, the Great Emperor, who believes he is also a "Great Economist" because of his economic stimulus package which generated huge profits for business but didn''t lower prices one cent, takes exception to this statement.

Still claiming that "there ain''t a recession, just a slowdown", the Great Emperor reminds the "Fed Head" that he should spend more time figuring out how to make each new penny minted EQUAL 1 cent and NOT 2 cents per coin!

SIG HEIL, BUSH!!!!
sig heil, DEFINITELY MORE OF THE SAME, McCain!!!!!

[mcv57]

This is a public confession that our government had lost control over the financial institutions in this country. Monopoly capatialism has crippled this economy, and socialism is required for any type of recovery.

Alas, democracy has been comprised by greed, but as with Socialism, Communism or Dictatorship they will fail also. Man cannot solve his own problems because he is not God.

When the Jews wanted a King of flesh to see and touch, God responded with warning of the nature of man and corruption. Nevertheless, the prophet Daniel elected King David - who committed adultery, murdered, and enforced deadly schemes to insure his secession (altered the Torah through political means).
------------

.... and eventually the Jewish Nation was destroyed and enslaved.

[kuei12]

I guess that''s why they elected him a judge. So he can come up with the obvious conclusions years after the disaster hits.

[whitemale08]

Of course it needs to be overhauled.

The Federal Reserve System needs to be SHUT DOWN and brought into receivership by Congress so it can conduct BANKRUPTCY of this outlaw institution.

This is exactly what happens when go off the GOLD STANDARD.

THX NIXON

[whitemale08]

Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.

John Maynard Keynes



--------------------------------------------------------------------------------

Posted by globlwarning at 01:07 PM : Jul 10, 2008-

Love it! lol classic quote.

That''s been our whole problem. We''ve been brainwashed into believing this Keynesian garbage!

[Michael Arnold]

Right. They need to set up a New Scam to make believers of the gullible and desperate. This time around, I don''t think there''s gonna be too many takers.

Criminals.

[gmcnally2]

The Fed is grasping for even more power, and it is already the ultimate power. Close the Fed, keep the interest from our debt. We are guilty of looking the other way as the greatest force gathers power for the inevitable storm. How about some truth in matters financial?

[lochlan-2009]

The whole country knows that this is criminal, and the Fed is doing a power grab. If they were on the ball, they would have done this when all the branches were republican. Then it would have flown through legislation with probably added powers on top of what they are requesting.


If you want to steal millions of dollars, you can either rob a bank, most likely get caught, and go to jail, or you can become a politician, possibly get caught, and get off scott free with a pension.

These people are criminal. The whole administration should be in jail. Instead they can write books on how they lied a country into going to war for profit, and never even get asked, what do they have to say to the 4,000+ dead soldiers families.

Probably because they would say, buy my book.

[gwagener]

This runs contrary to the whole Bush/Republican philosophy on regulation of business. Specifically, the philosophy is: The only thing worse than a regulation is a regulation that is enforced.
Case in point, the sub-prime lending business. The Bush administration removed all the regulations they could and chose not to enforce those regulations that remained. We all know how well that worked out.

[whitemale08]

I mean Bernanke is got this TAFT window open 24/7 with the printing presses going non stop handing out these endless promissary notes to his buddies on Wall Street and meanwhile we pay for it through inflation.

It''s insane!

[whitemale08]

Bush and company took off regulation from sub-prime so they can pretend like they gave us prosperous economy.

It was the biggest scam in American history.

[lochlan-2009]

"Fed Says Financial System Needs Overhaul"

No kidding, how about we start by making atleast one of the seven board members not jewish, llok it up if you don''t believe me. No,no Bush bootlickers, Israeli elitists haven''t infiltrated our government at all.

[antoniof123]

(CBS/ AP) Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told Congress Thursday that new regulatory powers are needed to insulate the national economy from damage if a big Wall Street firm collapses.

This bad and I mean really bad, when the Fed is telling congress to regulate we have a real problem on our hands. The Fed was started to stop bank panic become the lender of last resort now if they are worried we should be.

Thank you GOP for this and now when you are removed from congress by force of the voters we will not care.

NO more Bush and for certain NO McSame.

[whiskyrocker]

The "FED" is the problem with our financial system.

[tylenol6]

We need to get rid of the Federal Reserve. THEY ARE A
FRAUD!!!!!!!!!!!!!!!

[deacon20081]

Next in the News USA is Bankrupted by Bush Policies
and He Declares Martial Law.
Mexifornia becomes the newest State after Florcuba,
english speakers are now the minority.
Newdubia is new chosen name for New York City after Arabs buy 90% of property from China.......
More Later

[mcv57]

This is a public confession that our government had lost control over the financial institutions in this country. Monopoly capatialism has crippled this economy, and socialism is required for any type of recovery.

Alas, democracy has been comprised by greed, but as with Socialism, Communism or Dictatorship they will fail also. Man cannot solve his own problems because he is not God.

When the Jews wanted a King of flesh to see and touch, God responded with warning of the nature of man and corruption. Nevertheless, the prophet Daniel elected King David - who committed adultery, murdered, and enforced deadly schemes to insure his secession (altered the Torah through political means).
------------

.... and eventually the Jewish Nation was destroyed and enslaved.

[tylenol6]

Time for everyone to WAKE UP and think about voting for
RON PAUL for PRESIDENT. He has been warning the american
people about that the FEDERAL RESERVE is a FRAUD.....

[mcv57]

Posted by tylenol6

No thanks, the rise of racism is already spread thru the Ukrane.

[sistatee-2009]

The Fed says the financial system needs an overhaul? Who do you think f-cked up the current one? HUH? Who printed trillions of worthless FEDERAL RESERVE NOTES? HUH? Who did that, Ben? YOU DID! YOU STINKING T-RD! What you need, Ben, is a bullet at the base of your empty skull!!!!!

[mcv57]

This is a public confession that our government had lost control over the financial institutions in this country. Monopoly capatialism has crippled this economy, and socialism is required for any type of recovery.

Alas, democracy has been compromised by greed, but as with Socialism, Communism or Dictatorship they will fail also. Man cannot solve his own problems because he is not God.

When the Jews wanted a King of flesh to see and touch, God responded with warning of the nature of man and corruption. Nevertheless, the prophet Daniel elected King David - who committed adultery, murdered, and enforced deadly schemes to insure his secession (altered the Torah through political means).
------------

.... and eventually the Jewish Nation was destroyed and enslaved.

[mcv57]

Posted by SistaTee

Don''t blame Uncle Benny, he is only a puppet for the White House Regime.

[docpeter-2009]

From abcnews.com, "McCain himself saying of economic distress, "a lot of this is psychological. Because I agree the fundamentals of our economy is still strong.%u201D

"A top economic adviser to Sen. John McCain, R-Ariz., -- former Sen. Phil Gramm, R-Texas, now vice chair of Swiss banking giant UBS -- tells the Washington Times that the US economy is being weighed down by the belief by Americans that the economy is bad...You''ve heard of mental depression; this is a mental recession," Gramm tells the Washington Times
Adds Gramm: "We have sort of become a nation of whiners. You just hear this constant whining..."
McCain repeated that notion in an idea with Fox News'' Neil Cavuto, saying "a lot of our problems today, as you know, are psychological %u2014 the confidence, trust, the uncertainty about our economic future, ability to keep our own home." He said his proposed gas tax holiday "might give them a little psychological boost. Let%u2019s have some straight talk, it%u2019s not a huge amount of money.%u201D
_________________________________

So the gas tax holiday is going to be our economic effexor? Sort of like our rebates, mine which has been consumed with increased gasoline prices- increased food and clothing- increased electric bills- decreased spending on other things.

Oh wait, I am just economically depressed. I just need a holiday from the gas tax.

[fstop100]

There was a time if you screwed up your company you went bankrupt.. No free rides from the government.
We used to have anti trust laws to prevent monopolies and encourage honest competition.

[mcv57]

Posted by docpeter

The rich elites on drugs.

[docpeter-2009]

Oh excuse me for a minute.... the headline on abcnews.com says, "McCain Camp: Recession Due to ''Whiners''"

So it is also because so many of us whine about our economic problems, and are working poor, having soon decide whether i need to move or quit work so i can eat, I am a "whiner."

Hey, maybe i can get a little govt. cheese and crackers to go with this whine.

[antoniof123]

There was a time if you screwed up your company you went bankrupt.. No free rides from the government.
We used to have anti trust laws to prevent monopolies and encourage honest competition.

Posted by fstop100 at 02:57 PM : Jul 10, 2008

Then the Repbulicans took over congress and stole the white house and look at what we got. We went from the best of times to the wrost of times in less than 8 years no wonder we had to get them out of power fast.

And they think they are going to get power back this election; not according to the GOP only according to the followers.

[missingamerica]

"that new regulatory powers are needed to insulate the national economy from damage if a big Wall Street firm collapses....Both Bernanke and Paulson endorsed creating new procedures by which the government can guide an orderly liquidation of a failing investment bank in an effort to minimize any fallout that might be inflicted on the broader financial system and the overall economy."

What a crock!

That means protect the big-wheeled investors - who always get the most back - from the reckless and often illegal activities that lead to their collapse!

And what liars Republicans are! "Too much regulation - unless it is to protect the money of our donors and future employers, that is..."

[docpeter-2009]

From msnbc.com, "In an interview with the Washington Times, the McCain economic adviser downplayed the economy -- despite it having been the top issue of concern to voters in public polling for months. Gramm goes so far as to call the economy a "mental recession," says that "We have sort of become a nation of whiners" and blames much of the hand-wringing on the perpetual scapegoat -- the media."
_____________________

So i am not only a whiner in my mind the news media has told me that i am a having economic problems, at least according to McCain''s people.

Gee, since i evidently don''t have financial problems i think i will tell the same thing to the banks as i write the next hor check. i, evidently, have plenty of money because McCain & Co. say I am a whiner.

[mcvet]

97 plus percent all USA homeowners -

NOT IN FORECLOSURE!!!

Posted by badaxmofo at 03:28 PM : Jul 10, 2008
+ report

ROFLMAO Let me guess here. In your very small little mind YOU think you impressed someone here with this?? ROFLMAO Yep! I guess you gotta be fascist to understand! ROFLMAO SIEG HEIL BUSH

[antoniof123]

97 plus percent all USA homeowners -

NOT IN FORECLOSURE!!!

Posted by badaxmofo at 03:28 PM : Jul 10, 2008

Do you understand what you have just said you have got to give a neo con credit they will repeat things they have no clue about.

Hey moron that number needs to have faces and names to them becuase they will be sleeping in the streets maybe you should put them up.

[mcvet]

Oh excuse me for a minute.... the headline on abcnews.com says, "McCain Camp: Recession Due to ''''Whiners''''"

So it is also because so many of us whine about our economic problems, and are working poor, having soon decide whether i need to move or quit work so i can eat, I am a "whiner."

Hey, maybe i can get a little govt. cheese and crackers to go with this whine.

Posted by docpeter at 03:03 PM : Jul 10, 200

They haven''t a clue what it''s like to work on a pay check that will not get you through the week... they don''t care either! This is just an effort to get us at each others throat so they can stay in Power.

[mcvet]

Do you understand what you have just said you have got to give a neo con credit they will repeat things they have no clue about.

Hey moron that number needs to have faces and names to them becuase they will be sleeping in the streets maybe you should put them up.

Posted by antoniof123 at 03:34 PM : Jul 10, 2008

Please do you thik he would care? LOL He''s a greedy little human that care''s only for himself.. he''s made that more than plain on a number of occasions.

[antoniof123]

They haven''''t a clue what it''''s like to work on a pay check that will not get you through the week... they don''''t care either! This is just an effort to get us at each others throat so they can stay in Power.

Posted by MCVet at 03:35 PM : Jul 10, 2008

No actually they know their days of power are numbered and if the Fed is worried and they are then we should be worried becuase the fine print is expect this to happen in the not to distant future.

[bogusbones]

fix the economy. 1. get rid of wall street''s demands on quarterly profits. 2. regulate hedge funds and arbs. 3. get rid of the horrendous government regulations on small business. 4. get competitive in areas we are strong (manufacturing, service, technology). 5. get americans working - even if on government funded public service programs. 6. revamp the entire tax code - get rid of non productive services such as tax accountants. 7. instill a sense of quality and responsibility among american.

[stevex47]

This system works just fine when you don''t have idiot nutjobs at the helm.

[iphyt4u]

How about a plan to help people with food and medicine? How about a plan to help the homeless? How about a plan to help underprivaledged kids attend institutions of higher learning? How about a plan to watch over and assist the elderly? Republican welfare, lets help the banks that stole money from hard working people.

[geneonlbk]

I guess Bush is to be congratulated for getting eight years at the hog troth for all the rich neocons. Too bad it was on the backs of the working man.

[whitemale08]

97 plus percent all USA homeowners -

NOT IN FORECLOSURE!!!

Posted by badaxmofo at 03:28 PM : Jul 10, 2008-

Silly you...97% are not in foreclosure because you haven''t been foreclosed YET !!! DOOFUS.

[apprxam]

Phil Gramm, America''s financial guru...because he knows everything.

[deacon20081]

July 5, 2008 News
Accounting Plan Would Allow Use of Foreign Rules

Google it

[deacon20081]

Here is the link

Accounting Plan Would Allow Use of Foreign Rules

http://www.nytimes.com/2008/07/05/business/05sec.html?partner=rssnyt

[demwatcher]

"Silly you...97% are not in foreclosure because you haven''''t been foreclosed YET !!! DOOFUS.

Posted by whitemale08 at 06:25 PM : Jul 10, 2008"

You must be a LIBERAL to be so (cough) optimistic.

Dumbarse.