Thursday
May062010
More Regulation Necessary, Says Treasury Duo
Thursday, May 6, 2010 at 3:10PM
By Benny Martinez
University of New Mexico/Talk Radio News Service
Treasury Secretary Timothy Geithner told the Federal Crisis Inquiry Commission Thursday that the financial crisis the United States is currently struggling to resolve was caused by high-risk practices in the finance market and the failure to regulate them.
“A principal cause of the crisis was the failure to provide legal authority to constrain risk in this parallel financial system,” Geithner said.
Contrary to the belief that the financial crisis resulted from a “shadow banking system” that included institutions like Bear Stearns and Lehman Brothers, Geithner said that “it was not hidden, [in fact], it was operating in broad daylight [and] unlike the moral hazard risk in banks, this market grew up without government insurance or any history of governmental support in a crisis.”
Former Treasury Secretary Henry Paulson joined Geithner and said that the current financial crisis cannot be attributed to only one failure in the system.
"Many mistakes were made by all market participants, including financial institutions, investors, regulators, and the rating agencies, as well as by policy makers," said Paulson.
Paulson said that regulators need to implement a stronger arsenal of tools in order to prevent another crisis. The former Treasury Secretary emphasized that lawmakers need to take precautionary measures in tight regulations.
According to Paulson, although regulation of the “shadow banking system” needs to improve, it remains a vital component in reviving America’s struggling economy.
University of New Mexico/Talk Radio News Service
Treasury Secretary Timothy Geithner told the Federal Crisis Inquiry Commission Thursday that the financial crisis the United States is currently struggling to resolve was caused by high-risk practices in the finance market and the failure to regulate them.
“A principal cause of the crisis was the failure to provide legal authority to constrain risk in this parallel financial system,” Geithner said.
Contrary to the belief that the financial crisis resulted from a “shadow banking system” that included institutions like Bear Stearns and Lehman Brothers, Geithner said that “it was not hidden, [in fact], it was operating in broad daylight [and] unlike the moral hazard risk in banks, this market grew up without government insurance or any history of governmental support in a crisis.”
Former Treasury Secretary Henry Paulson joined Geithner and said that the current financial crisis cannot be attributed to only one failure in the system.
"Many mistakes were made by all market participants, including financial institutions, investors, regulators, and the rating agencies, as well as by policy makers," said Paulson.
Paulson said that regulators need to implement a stronger arsenal of tools in order to prevent another crisis. The former Treasury Secretary emphasized that lawmakers need to take precautionary measures in tight regulations.
According to Paulson, although regulation of the “shadow banking system” needs to improve, it remains a vital component in reviving America’s struggling economy.
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