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Fallout: The Financial Crisis

House looks to rework financial rules

Marketplace Staff Oct 29, 2009
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Fallout: The Financial Crisis

House looks to rework financial rules

Marketplace Staff Oct 29, 2009
HTML EMBED:
COPY

TEXT OF INTERVIEW

Bill Radke: This morning the House Financial Services Committee holds a hearing on what it hopes is a financial fix called “systemic regulation.” Marketplaces Ashley Milne-Tyte joins us live for a preview. Good morning, Ashley.

Ashley Milne-Tyte: Good morning.

Radke: What are we likely to hear today?

Milne-Tyte: Well this is talking about reworking a lot of the financial rules already exist, and that many would argue haven’t done as much good lately. So they’ll probably be talking about the Fed, which may possibly become the so-called system regulator, meaning the one charged with looking at the whole financial system. Not everyone’s a fan of that idea because they say the Fed didn’t really do its job leading up to the financial crisis, so they don’t particularly want to give it more power. And Treasury Secretary Tim Geithner will be there, and he will be probably recommending that legislation is passed that would let federal regulators sort of identify and monitor big financial firms and step in to wind them down before they collapse.

Radke: And I understand the FDIC will be there as well, and the person of its chair, Sheila Bair.

Milne-Tyte: Yes, that’s right. And one thing she’s keen on is something we’ve been hearing a little bit about this week, and that’s the idea that financial firms should pay into a fund that the government would use if one of those financial firms failed. So they use that money to wind down a failed firm, or at least that’s the idea. I spoke to Matthew Slaughter a bit earlier. He’s a business professor at the Tuck School of Business at Dartmouth, and he says it’s still up in the air as to how the scheme might work and who’d pay what exactly.

Matthew Slaughter: In the past couple of days, new proposals have emerged for having larger targets on larger financial institutions, but I think that’s going to be a challenge to identify which financial institutions would classify as large and what the amount of pay-in should be for each of those firms.

But this week, the Treasury Department and the House Services Financial Committee have agreed on sort of a compromised legislation that would require companies with more than $10 billion in assets to pay back taxpayers in the event that a firm failed.

Radke: Marketplace’s Ashley Milne-Tyte joining us live. Thanks Ahsley.

Milne-Tyte: You’re welcome.

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