WASHINGTON (Reuters) – With the subprime mortgage crisis fanningrecession fears, Washington is scrambling to jump-start the U.S.economy and ease the blow of falling home prices and risingforeclosures.
The Federal Reserve is slashing interest rates and Congress ismoving fast to complete a fiscal stimulus package likely to includesteps to prop up the mortgage market and help save many Americans frombeing thrown out of their homes.
Emergency policy options, as well as the outlook for long-termreforms to the banking system, will feature in discussions with 20 toplawmakers and regulators scheduled to appear at the Reuters RegulationSummit that runs February 5-8.
As the markets swing sharply on each new subprime development,members of Congress and senior supervisors for the banks and WallStreet will meet with Reuters journalists in Washington D.C.
Among lawmakers being interviewed are Democrats Carl Levin ofMichigan and Charles Schumer of New York, and Republican CharlesGrassley of Iowa, all from the Senate, which is working to complete amulti-billion-dollar stimulus package to send to the White House bymid-February.
The package may include a provision to allow the Federal Housing Administration and housing finance giants Fannie Mae and Freddie Mac to back larger loans and let distressed borrowers refinance into more affordable mortgages.
Skepticism about such a move has been expressed by James Lockhart,director of the Office of Federal Housing Enterprise Oversight, whichregulates Fannie and Freddie. Lockhart is also scheduled to take partin the Reuters summit.
The subprime crisis, more than any other recent troubles in thebusiness world, such as the Enron collapse or the stock analystscandal, is revealing the street-level dangers posed by long-festeringproblems at the core of the financial system.
Predatory consumer lending, baffling complexity in securitized debtmarkets, inadequate government oversight, opaque balance sheets, anddeceptive accounting — all are issues confronting financial regulatorswith new urgency.
For instance, questions about the risks posed by financial woes at bond insurers, such as MBIA and Ambac Financial,will be put to key banking overseers at the summit, including FederalDeposit Insurance Corp Chairman Sheila Bair and the heads of the Officeof Thrift Supervision and the Comptroller of the Currency.
The event will also feature Rep. John Dingell, a feared investigatorand chairman of the House of Representatives Energy and CommerceCommittee, a wide-ranging panel with jurisdiction over consumerprotection.
Two officials from the Securities and Exchange Commission, includingCommissioner Paul Atkins, will attend the summit as the SEC probes thesubprime involvement of investment banks Morgan Stanley, Merrill Lynch, UBS AG, Bear Stearns and many other companies.
Also at the summit will be top accounting and auditing regulators,at a time when major financial houses are recording hugemortgage-related losses.
How could it be that the highly paid wizards of Wall Street, afteryears of promoting innovative new risk management methods, could havegotten the subprime market so wrong? What balance sheet shortcomingscaused such widespread error?
Issues such as these — as well as others unrelated to the subprimecrisis, such as clinical drug trial fraud and patent law changes — canbe expected to dominate the summit.
(Reporting by Kevin Drawbaugh; Editing by Tim Dobbyn)
CopyrightReuters 2008. All rights reserved. Users may download and print extracts ofcontent from this website for their own personal and non-commercial use only.Republication or redistribution of Reuters content, including by framing orsimilar means, is expressly prohibited without the prior written consent ofReuters. Reuters and the Reuters sphere logo are registered trademarks ortrademarks of the Reuters group of companies around the world.
