Still more reg reform needed, Greenspan says

Following the “breakdown of the central pillar of competitive markets,” new regulatory changes will be needed in the areas of fraud, settlements and securitization in order for the financial markets to “return to stability,” former Federal Reserve Chairman Alan Greenspan said today.
OCT 23, 2008
By  Bloomberg
Following the “breakdown of the central pillar of competitive markets,” new regulatory changes will be needed in the areas of fraud, settlements and securitization in order for the financial markets to “return to stability,” former Federal Reserve Chairman Alan Greenspan said today. But “whatever changes are made ... will pale in comparison to the change already evident in today's markets,” he said this morning in prepared remarks delivered before the House Committee on Government Oversight and Reform. “Those markets for an indefinite future will be far more restrained than would any currently contemplated new regulatory regime.” Exotic investments, including structured investment vehicles and Alt-A mortgages, among others, are unlikely to find willing investors, Mr. Greenspan said. That list, he said, also includes subprime mortgages, for which the market has virtually disappeared. “We should seek ways to re-establish a more sustainable subprime-mortgage market,” Mr. Greenspan said. Following the crisis, the financial landscape will be far different from the one of a little more than a year ago, and investors will be “extremely cautious,” he said. Meanwhile, Securities and Exchange Commission Chairman Christopher Cox told the committee that the “lessons of the credit crisis all point to the need for strong and effective regulation, but without major holes and gaps.” The crisis also highlights the need for a “strong SEC, which is unique in its arm's-length independence from institutions and persons it regulates,” he said. In other remarks delivered before the committee, former Treasury Secretary John W. Snow said that the bipartisan consensus to promote home ownership went “too far,” noting that there was a push for too much of a good thing. “Those excesses eventually came home to roost,” he said. “Policymakers put too much emphasis on home ownership to the exclusion of other goals — thrift, saving, deficit reduction, and other productive investments.”

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