WASHINGTON - The House Financial Services Committee will hold a hearing March 20 to promote aggressive federal and state investigations of financial fraud and other abuses, including auction-rate securities, the panel's chairman said yesterday.
Outlining the committee's agenda for the next two months, Rep. Barney Frank, D-Mass., said the hearing will include the U.S. attorney general, state attorneys general, the Securities and Exchange Commission, the Federal Bureau of Investigation, and others, and will be aimed at restoring investor confidence in the financial markets.
"Everything will be included," Frank said, adding that fraud in the ARS market could be subject to civil and criminal investigations.
The committee also has scheduled at least three additional hearings on March 17, 24, and 26 that will examine the need for a systemic regulator for the financial services industry.
Frank said he does not support combining the SEC with the Commodity Futures Trading Commission. He suggested that the Federal Reserve fits the needs of a systemic regulator.
"The first step is to create a systemic risk regulator and that means giving it some power that neither the SEC nor the CFTC fully has right now," he said, noting that there is a difference between systemic risk and investor protection.
Meanwhile, the House Financial Services Committee's capital markets subcommittee held a hearing to discuss the creation of a systemic regulator, which delved into the risks that credit-default swaps pose to the economy. A Government Accountability Office report submitted to the panel found that CDS generally are unregulated. The banking regulators have some oversight but it is limited to monitoring the safety and soundness of supervised banks that act as CDS dealers, it said.
The hearing came as the National Conference of Insurance Legislators announced it is forming a task force to explore regulatory options and develop model legislation for CDS, which it will consider in a July meeting.
Also at the capital markets subcommittee hearing, Timothy Ryan Jr., chief executive officer of the Securities Industry and Financial Markets Association, detailed 15 policies appropriate for a systemic regulator.
Ryan said "it would probably be useful" to modernize the Federal Reserve's Rule 13(3), which Fed chairman Ben Bernanke has said prohibits the Fed from aiding state and local governments. However, Ryan did not mention states and localities.