Bailout Draft Calls for Studies of Regulatory Roles

Section 105 of the draft bailout bill currently before the House requires the Secretary of the Treasury to "review the current state of the financial markets and the regulatory system" and to report to Congress by April 2009 on "the current state of the regulatory system and its effectiveness at overseeing the participants in the financial markets, including the over-the-counter swaps market and government-sponsored enterprises." The required report is to provide recommendations on whether any participants in the financial markets that are currently outside the regulatory system should become subject to the regulatory system and how to enhance the clearing and settlement of over-the-counter swaps.

In Section 117, the Comptroller is charged with studying the role of leverage in the markets. The purpose of the study would be to determine the extent to which leverage and sudden deleveraging of financial institutions precipitated the current financial crisis. The study is to examine the proper regulatory role of the Federal Reserve, the SEC, the Secretary of the Treasury and the banking regulators with respect to monitoring leverage and curtailing excessive leveraging. The study would be due to Congress in June 2009.