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Thursday, July 10, 2008

Paulson on Regulatory Restructuring

by Calculated Risk on 7/10/2008 10:06:00 AM

From the WSJ: Bernanke, Paulson Push For New Regulatory Powers

Treasury Secretary Henry Paulson ... made a point to address the issue of Fannie Mae and Freddie Mac.
They play an important role in our housing markets today and need to continue to play an important role in the future," Mr. Paulson said. He noted that the firms' regulator, the Office of Federal Housing Enterprise Oversight, stressed earlier this week that "they are adequately capitalized."

Mr. Paulson also said the collapse of Bear Stearns and the ongoing market turmoil have "convinced me that we must move much more quickly to update our regulatory structure and improve both market oversight and market discipline."
"For market discipline to be effective, market participants must not expect that lending from the Fed, or any other government support, is readily available," Paulson said. Added Mr. Paulson, "For market discipline to effectively constrain risk, financial institutions must be allowed to fail."
Here is Bernanke's testimony (just a repeat of earlier comments)

Note: the collapse in Fannie (off 15%) and Freddie (off 23%) stock prices continues this morning.