Regime Change?

As a probable bailout bill moves through Congress, it may be a good time to assess some matters that impact federal securities regulation. It is too early to assees whether the financial regulatory regime we have labored under since the New Deal is broken beyond repair. But it is almost certain that the 111th Congresss will pass major securities and financial regulatory structure next year in what may be the equivalent of FDR's first hundred days legislation. I believe that our oversight chairs are up to the task, Barney Frank Chair of the House Financial Services Committee and Chris Dodd, chair of the Senate Banking Committee.

It is also too early to determine if we will see the equivalent of the Pecora hearings in an effort to determine what happened and possibly assess blame. But that scenario is very possible. Reform of securitizaton is essential since many still believe that we cannot return to the originate and hold model. Fair value accounting, FAS 157, will be examined for its role, as well as the credit rating agencies. Te continued efficacy of the principle of functional regulation, enshrined in the Gramm Leach Bliley Act, must be studied.