(Updates with Dugan on accounting rules changes, Bernanke on
oversight and systemic risk)
WASHINGTON, July 24 The following are
highlights from the House Financial Services Committee hearing
on Friday with Treasury Secretary Timothy Geithner, Federal
Reserve Chairman Ben Bernanke, FDIC Chairman Sheila Bair,
Comptroller of the Currency John Dugan, Office of Thrift
Supervision acting Director John Bowman and Joseph Smith, North
Carolina Commissioner of Banks, testifying on regulatory
For a story on the hearing, see, [ID:nN24457090]
For a story on Bernanke's testimony, see, [ID:nN24455042]
For a story on Geithner's testimony, see, [ID:nN24347905]
For a story on Bair's testimony, see, [ID:nWEQ001243]
For a story on Bowman's testimony, see, [ID:nWEQ001241]
For a story on Dugan's testimony, see, [ID:nWEQ001240]
DUGAN ON POTENTIAL ACCOUNTING RULE CHANGE:
"As I understand it, it would move more of the loans on
balance sheet to a mark-to-market or fair value status but it
would have different treatment for how the ups and downs would
be run through the balance sheet. I do, I must say, have a very
significant concern about moving more assets and liabilities
into the mark-to-market arena. I thought given all of the
issues that we have had this year about the volatility that it
introduces to income statements and balance sheets, that we
wouldn't have continued marching down that path."
BERNANKE ON OVERSIGHT OF FIRMS POSING SYSTEMIC RISK:
"On order of magnitude, a very rough guess would be 25
(firms). I would like to point out that virtually all those
firms are organized as bank holding companies, or financial
holding companies, which means the Federal Reserve already has
umbrella supervision , so I would not envision the Fed's
oversight extending to any significant number of additional
BERNANKE ON MAKING RESERVE BANK PRESIDENTS APPOINTEES:
"We do not support presidential appointments of the Reserve
Bank presidents. We are in a situation now where we need to
increase our consistency of enforcement and oversight, where we
need to coordinate across the system, and I think creating 12
new presidential appointees -- 19 presidential appointees
around the FOMC table -- is going to create a more diffuse and
BERNANKE ON FED EMERGENCY LENDING AUTHORITY
"We recognize the need to be careful in the use of this
authority and, in particular, if this Congress puts together a
resolution authority that can address the problem of failing
firms then I would certainly be open, in fact quite eager, to
subordinate 13(3) authority to the request, or the requirement,
of the resolver."
GEITHNER ON WHY REFORMS SHOULD NOT BE PIECEMEAL:
"I think they need to be done as a package. You can't fix
this by just looking at capital over here and looking at
consumer protection over here. And on the systemic stuff,
including on the rating agencies, you have to look (at a)
comprehensive set of reforms together as a package. And as I
said in my opening remarks, it is very important that we move
this year just because as you already have heard given the
scale of interest effected by these reforms, given the amount
of authority we are proposing to take away from people who have
it today, there is a lot of resistance and opposition and if we
wait or we try to do it piecemeal it is going to be much
harder, I think, for this committee to find consensus on
something sufficiently strong."
GEITHNER ON CREDIT RATING AGENCIES
"I don't see a practical viable alternative to (the
issuer-paid model, where credit rating agencies are paid by the
bank or issuer whose products they rate).
"It is an important area of reform and we don't believe we
have a monopoly of wisdom in these areas and we are happy to
look at any idea, including the ones you (Rep. Paul Kanjorski)
list in your opening statement."
GEITHNER ON TAXPAYER LOSSES DUE TO BAILOUTS:
"I don't believe we're in the position today or even this
month or maybe even this year top give you a realistic estimate
yet of those losses."
GEITHNER ON CURRENT SYSTEM OF PRUDENTIAL SUPERVISION
The institutions who have this authority and have teams of
dedicated, motivated people with that responsibility today --
they are not enthusiastic about giving up that authority. ...
And I understand the obligation they feel. On the substance,
though, these are very different types of responsibilities.
Prudential supervision is different from consumer protection.
... Again, we've had a running national experiment ... and that
did not turn out so well for us. So I think the basic point is
-- I don't think there's a plausible defense of maintaining
that current system in place today, although I understand why
people who still preside over those authorities make the case
to preserve them.
GEITHNER ON THE SEVERITY OF THE HARM CAUSED BY FINANCIAL
"The damage has been indiscriminate and unforgiving.
Millions of Americans have lost their jobs; families have lost
their homes; small businesses have shut down; students have
deferred college educations; and seniors have shelved
"As a country, we now know that our financial system failed
in its most basic responsibility to be stable and resilient
enough to provide credit while protecting consumers and
GEITHNER ON THE NECESSITY FOR CONGRESS TO ACT ON REFORM:
"There exists today a national mandate, not seen in years,
to reform our outdated and ineffective regulatory system.
Still, despite that reality, there are some who suggest we are
trying to do too much too soon, and that we should wait until
the crisis has definitively receded. And with respect to
consumer protection in financial services, there are even those
who contend we should leave things as they are."
"Every financial crisis of the last generation has sparked
some effort at reform, but past attempts began too late, after
the will to act had subsided."
"That cannot happen this time."
FDIC CHAIRMAN SHEILA BAIR ON PROTECTING CONSUMERS:
"There is a direct correlation between effective consumer
compliance programs and safe and sound institutions."
"The (consumer agency) should have sole rule writing
authority over consumer financial products and services and the
federal banking regulators should be required to examine for
and enforce those standards."
"Regulators should take into account off balance sheet
assets and conduits as if these risks were on balance sheet."