The Home Front

I just got the release for a Joint Economic Committee hearing scheduled for later this month. Looks like Nouriel Roubini—who predicted the housing bust and the credit crisis—will be among those testifying.

From the release:

Washington, D.C.—U.S. Senator Charles E. Schumer and Representative Carolyn B. Maloney, Chairman and Vice Chair respectively of the Joint Economic Committee (JEC), will hold a hearing about the Bureau of Economic Analysis's release of the Gross Domestic Product (GDP) numbers for the third quarter on Thursday, October 30, 2008 at 10:00 am in Room 106 of the Dirksen Senate Office Building. Preliminary data show that export growth has stalled while real consumer spending declined in July, and did not grow in August, and retail sales have fallen sharply over the past few months. These data indicate that the third quarter GDP will likely show faltering overall economic performance.

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During Sen. Bob Casey's opening statement at a Senate hearing Thursday on the economic crisis, this statement caught my attention:

From the Pennsylvania Democrat's press release:

"After hearing from housing counselors in Pennsylvania who aren't having their calls returned when they try to renegotiate mortgages to keep people in their homes, I can't help but think that banks are holding off on modifying loans because they are waiting to see if they can sell to Treasury."

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Speaking Thursday at a Senate Banking Committee hearing, Eugene Ludwig, a former comptroller of the currency, outlined his seven key elements for a successful financial regulatory framework.

From Ludwig's testimony:

It is clear that the deregulatory mantra of the last decade is dead. The real question is how far do we go in terms of regulating the financial system. Do we in essence nationalize it, making banking all but a public utility? I fervently hope not. But we have to massively change how we have been regulating and supervising. We have to take better control of the revolutions in technology and globalization. We have to get the fire back in the fireplace.

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In an economic address Wednesday, Federal Reserve Chairman Ben Bernanke shed some light on the government's decision not to bail out the now bankrupt investment bank Lehman Brothers.

From his prepared remarks:

A public-sector solution for Lehman proved infeasible, as the firm could not post sufficient collateral to provide reasonable assurance that a loan from the Federal Reserve would be repaid, and the Treasury did not have the authority to absorb billions of dollars of expected losses to facilitate Lehman's acquisition by another firm. Consequently, little could be done except to attempt to ameliorate the effects of Lehman's failure on the financial system. Importantly, the financial rescue legislation, which I will discuss later, will give us better choices. In the future, the Treasury will have greater resources available to prevent the failure of a financial institution when such a failure would pose unacceptable risks to the financial system as a whole. The Federal Reserve will work closely and actively with the Treasury and other authorities to minimize systemic risk.

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