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Washington: Congress to address banking regulations

By: Herman Wang
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WASHINGTON — With the passage of the $700 billion Wall Street rescue package, lawmakers are turning their attention to reforming the country’s financial regulatory system to ensure that another meltdown of this magnitude doesn’t occur again.

Sen. Bob Corker, R-Tenn., a member of the Senate Banking Committee, said Congress likely will take up regulatory reform when it reconvenes in January.

“The regulatory regime in place is not appropriate,” he said. “Banking is now global, and we’ve seen what’s happening in this country affect other countries and vice versa.”

Sen. Corker said the U.S. Securities and Exchange Commission, the Federal Deposit Insurance Corp. and other regulatory agencies are operating in a “20th century” system and should be better coordinated.

“We need to modernize these systems so there aren’t huge gaps,” he said. “The regulatory process has got to acknowledge there are many ways that these (banking) institutions can get into risk that can bring them down.”

Rep. Lincoln Davis, D-Tenn., a member of the House Financial Services Committee, said he expects hearings to focus on subprime lending and abusive lending practices. He said debt ratings agencies, such as Standard & Poor’s and Moody’s, need to be given greater oversight.

“The same agencies that evaluate and determine the ratings are getting paid by the very entities they are being paid to evaluate and analyze,” he said. “The securities they were analyzing consisted largely of subprime loans, a large number of them to people in debt or living beyond their means, and yet they failed to include this aspect as risk.”

As lawmakers return to their home states and districts, they say constituents increasingly are understanding of why the bailout was passed but still have major concerns about the state of the economy. Among Chattanooga-area lawmakers, all four senators from Georgia and Tennessee, plus Rep. Zach Wamp, R-Tenn., voted in favor of the $700 billion rescue plan.

Reps. Davis and Nathan Deal, R-Ga., voted against it.

Rep. Wamp said “sweeping reform” is needed in the financial sector, but he warned that Congress should not allow undue influence from lobbyists.

“We need to make sure the special interests don’t get involved and set up a whole new system that allows somebody else to profit unfairly,” he said.

Sen. Lamar Alexander, R-Tenn., said he hopes to re-examine oversight of mortgage guarantors Freddie Mac and Fannie Mae, along with homeownership programs that encouraged people to purchase homes they could not afford.

Sen. Johnny Isakson, R-Ga., said Wall Street investors should be subject to the same accountability and transparency rules as the banking industry.

Sen. Saxby Chambliss, R-Ga., said he still hopes to address major energy legislation, in addition to banking reform, when Congress reconvenes.

Sen. Chambliss is a leader of the “Gang of 20” senators, including Sens. Corker and Isakson, that have proposed an energy plan that includes limited off-shore drilling and investments in alternative energy. The package was unveiled in August as gas prices peaked, but since has been put on the back burner because of the current credit crisis.

“The energy issue is, without question, part of the reason we’re in these tough economic times,” Sen. Chambliss said. “People are still paying too much for gas.”

Sen. Corker said he also will push the energy proposal.

“At the end of the day, we cannot lose sight of the fact that energy is important to us as a national security and economic issue,” he said.

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