2009 0305 - GOV (House) - Perspectives on Systemic Risk

  • Perspectives on Systemic Risk (Part 1 of 2) - Video
    • 01:18:00 - Mr. Ryan - Private Equity
    • 01:23:00 - Extortion
  • [What is Systemic Risk?]
  • (p19) - Chairman Paul KANJORSKI (D-PA).The thing that disturbs me is trying to get my arms around the idea of just what is a ‘‘systemic risk.’
    • ’ ...if people could have rapidly seen systemic risk would have occurred.
    • We certainly have enough regulators who had eyes on the situation.
    • We have all talked about it, I can assure you, and we have heard you.
    • I think when the question came up in 1964, Justice Potter Stewart, in trying to explain what was ‘‘obscene,’’ he said the following,
      • ‘‘I shall not today attempt further to define the kinds of materials I understand to be embraced, but I know it when I see it.’’
      • I think probably with systemic risk, after the fact, we seem to all know it when we see it, but before it arrives, we have no idea.
    • If you make the proper conclusions, we would not be in the crisis we are in today, if people could have rapidly seen systemic risk would have occurred.
      • We certainly have enough regulators who had eyes on the situation.
      • They just were not analyzing or seeing the situation.  
  • [Crisis in Confidence]
  • (p25) - Terri Vaughan:  (NAIC CEO - IA) - We do not know what the mix of those two is, but to force companies that are going to hold these assets long term that do not have to sell in this illiquid market, to force them to write down to a value that reflects current illiquidity, I am wondering, again, just sort of thinking through it, whether it is sending the wrong signal to the marketplace, and particularly, I think about consumers, is it sending the wrong signal to consumers about the capital that is in these companies and how strong these companies are.
    • One of my colleagues likes to say the greatest risk we have right now is a crisis of confidence. It is that people are scared.
    • We know our policyholders are scared.
    • That is one of the reasons that the insurance regulators have really been struggling with what kind of reporting requirements should we be having in this environment right now where the markets are not anything that we have ever lived with before, not in my lifetime.
  • Gary ACKERMAN (D-NY) - We cannot address or we certainly cannot legislate the confidence in the market.
    • We are going to do a lot of cheerleading to do that.
  • (p26) - Specer Bachus (R-AL):  Now, we are asking the Fed—Mr. Bartlett, I think you will agree that the President’s Working Group in 1988 and then this Congress in 1991 actually directed the Treasury and the Fed to look at systemic risk and see what sort of powers they ought to have to deal with it. 
  • (p28) - Terri VAUGHAN:We have been the recipient of several GAO studies, thank you very much, that pointed to problems in our system, and that we then went and fixed.  
  • Terri Vaughan (NAIC-CEO)
    • I will tell you, the insurance regulators have had failures also.
    • We have been the recipient of several GAO studies, thank you very much, that pointed to problems in our system, and that we then went and fixed.  (p28), (Part 1 of 2)