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Hearings on Independence of the Federal Reserve, and Derivatives This Week

Posted By Chris Whalen On July 7, 2009 @ 1:30 pm In Bailouts,Politics,Regulation | Comments Disabled

One of the friends of TBP on Capitol Hill sent a note yesterday about two important hearings before the House Financial Services Committee:

“Lots of interesting hearings coming up in the next month (next Monday is one on Too Big to Fail and one on Insider Trading by Government Officials).  It’s a very critical month; Barney wants to get regulatory restructuring done by the end of July, so this is going to be an extremely heavy legislative session.  This week has (among other things) hearings on the independence of the Federal Reserve and on derivatives on Friday (with Geithner).  The links are below.”

Thursday at 2pm: Regulatory Restructuring: Balancing the Independence of the Federal Reserve in Monetary Policy with Systemic Risk Regulation
http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrdmp_070909.shtml [1]

Friday at 10am: A Review of the Administration’s Proposal to Regulate the Over-the-Counter Derivatives Market

http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrfc_081009.shtml [2]

In the Thursday hearing on the independence of the Fed (or lack thereof), the star witness there will be Vice Chairman Kohn.  Readers of TBP will recall our description of how nearly two decades ago Don Kohn helped to author the changes to the Federal Reserve Act (FRA) that allowed Geither to rescue AIG.   You can read our views on same and our description of how Walker Todd tried to fight this change as an officer of the Cleveland Fed:  ‘IndyMac, FDICIA and the Mirrors of Wall Street’, January 6, 2009 [3]

In terms of derivatives, a joint Financial Services-Agricultural Committee hearing will be held Friday.  There may be over a hundred members of Congress and one witness: Tim Geithner.  As many of you know, I have been very critical of Geithner and his pandering to Wall Street.  I continue to believe that the loans to AIG are in violation of the FRA because they are not fully collateralized and thus not sell-liquidating.

I asked the HFSC to explain the rational for having Secretary Geithner as the only witness for the joint hearing on OTC derivatives:

“Why is Chairman Frank only inviting Geithner for the OTC hearing?  Aside from the fact that he is a puppet of JPM/GS/SIFMA, he does not really understand the subject matter!”

A senior staffer replied:  “Ha!   Answer: because Geithner appears to have forgot what happened to Icarus, although that is a more-global problem for him than just this one hearing.”

I am working on written answers to questions from the Senate Banking Committee on OTC derivatives reform from the 6/22/09 hearing on same. [4] I will post the questions and my responses later in the week.

Best,

Chris


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2009/07/hearings-on-independence-of-the-federal-reserve-and-derivatives-this-week/

URLs in this post:

[1] http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrdmp_070909.shtml: http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrdmp_070909.shtml

[2] http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrfc_081009.shtml: http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrfc_081009.shtml

[3] ‘IndyMac, FDICIA and the Mirrors of Wall Street’, January 6, 2009: http://us1.institutionalriskanalytics.com/pub/IRAstory.asp?tag=333

[4] Senate Banking Committee on OTC derivatives reform from the 6/22/09 hearing on same.: http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=34ee16e5-5bf4-4bb1-85db-d05d911c08a0

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