WASHINGTON, May 6 -- U.S. Treasury Secretary Timothy Geithner and his predecessor Henry Paulson said on Thursday that more regulation are needed to prevent future crisis.
"The history of this crisis is full of examples where regulators did not use the authority they had early enough or strongly enough to contain risks in the system," Geithner said in his testimony before Congress' Financial Crisis Inquiry Commission.
"But a principal cause of the crisis was the failure to provide legal authority to constrain risk in this parallel financial system," said the Treasury chief. "As a result of this run, aggressive policy measures were required to prevent a second Great Depression."
Paulson, who was Treasury secretary when the financial crisis erupted, agreed that regulators need stronger tools to prevent future crises. "Our regulatory system was balkanized, outdated, and lacked the infrastructure to oversee these markets," said Paulson, "When the crisis hit, the stress it placed on these markets exposed many of these flaws, and these flaws in turn extended and exacerbated some of the effects of the crisis."
But Paulson also warned against the measures that he said might hurt financial innovations.
"Our financial system cannot move forward without fortifying the weak parts of its infrastructure." said Paulson. "But in addressing these problems, we must make sure we retain the benefits of the underlying financial innovations." |
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