Congress eyes solutions for Wall Street woes
Lawmakers focus on bailouts and look to overhaul financial regulations.
With the future of Wall Street giants on the line, Congress is not clamoring for a say in who gets federal help and who does not – at least, for now.Skip to next paragraph
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Democrats say that the debacle in US financial markets is the responsibility of the Bush administration: The president touted the value of deregulation; let him sort out its consequences, if he can.
But top lawmakers on both sides of the aisle do want a quick accounting for how those decisions were made and what impact they're likely to have on US taxpayers in the future.
In the longer run, they're gearing up for a battle in the new Congress over an overhaul of the nation's regulatory structure, including the possible creation of new entities modeled after the Resolution Trust Corporation, which helped resolve the savings-and-loan crisis in the late 1980s.
"Apparently, the private market is so messed up it may not be able to function unless there is more systematic federal relief in the sense of taking over some bad assets," said Rep. Barney Frank (D) of Massachusetts, who chairs the House Financial Services Committee.
Coming on the heels of a weekend decision by federal regulators not to back investment bank Lehman Brothers, Tuesday's $85 billion bailout of American International Group Inc. (AIG) took lawmakers by surprise.
"An $85 billion loan is a staggering sum and is just too enormous for the American people to bear the risk; Congress will demand answers to prevent this from happening again," said House Speaker Nancy Pelosi in a statement after meeting with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke on Tuesday.
Senate majority leader Harry Reid announced on Wednesday that he plans to hold the Senate in pro forma sessions after the November elections, so that oversight committees can continue working on the financial crisis.
"Secretary Paulson said this would have to take place in the next administration because there's just so much that has to be determined," he said.
First step: Extensive rounds of oversight hearings, beginning this week and carrying on through the traditional fall recess. This week and next, House and Senate banking panels are summoning federal regulators to field questions on issues ranging from the response to bank failures and the government takeover of mortgage giants Fannie Mae and Freddie Mac to turmoil in US credit markets.
But lawmakers are already looking to fall elections and a new administration thereafter to settle the issue of what changes in the nation's regulatory framework may be needed – or politically possible.