TARP oversight panel makes recommendations to prevent future crises

  • January 30th, 2009 8:43 am ET

Ron Moore

Sponsor an Examiner

The American public took the first step in addressing the financial crisis by ousting those who offended their values. Nevertheless the work continues as stimulus is injected into the economy and a Congressional oversight panel makes recommendations based on analyses of how we got here and what we can do between elections to reform our system. 

In response to the escalating crisis, on October 3, 2008, Congress provided the U.S. Treasury with the authority to spend $700 billion to stabilize the U.S. economy. Congress created the Office of Financial Stabilization within Treasury to implement a Troubled Asset Relief Program. At the same time, Congress created a Congressional Oversight Panel to “review the current state of financial markets and the regulatory system.”
 
The COP is empowered to hold hearings, review official data, and write reports on actions taken by Treasury and financial institutions and their effect on the economy.
 
In its special report on regulatory reform the COP discusses how regulation would have averted the crisis that we are in today, and how the implementation of smart regulation will help the United States can prevent another financial crisis and determine our economic success in the years to come.
 
The report examines how deregulation of financial markets over the last twenty-five years have returned the boom-and-bust cycles that had plagued the United States’ economy until reforms of the Great Depression ushered in a half-century of financial stability. The report specifically points to three areas of regulation that could have prevented the current economic crisis, specifically basic consumer protection rules, supervision of credit rating agencies, and regulation of companies that are “too big to fail.”
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Specifically, the report outlines eight ways to use regulation to prevent future crises:
 
  • Better regulate the way loans are made to consumers;
  • Seriously regulate credit rating agencies;
  • Better manage dealing with “too-big-to-fail” companies;
  • Identify and regulate financial institutions that pose systemic risk;
  • Increase supervision of derivatives and off-balance sheet entities that have created a shadow financial system;
  • Change executive pay structures to discourage excessive risk-taking;
  • Work with other countries to establish basic rules that will apply to companies doing business around the globe;
  • Plan now for the next crisis.
 
Watch video of Chair Elizabeth Warren introducing this report below