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DODD HOLDS 1ST HEARING ON NEW PROPOSALS TO REIN IN WALL STREET

Gives Strong Endorsement to “Volcker Rule”

February 2, 2010

WASHINGTON – Today Senate Banking Committee Chairman Chris Dodd (D-CT) held a hearing on recent proposals by the Obama Administration to rein in Wall Street Banks.
 
 “The Obama administration has proposed bold steps to make the financial system less risky.  We welcome those ideas,” said Dodd. “The first would prohibit banks – or financial institutions that contain banks – from owning, investing in, or sponsoring a hedge fund, a private equity fund, or any proprietary trading operation unrelated to serving its customers… I strongly support this proposal.  I think it has great merit.” 
 
“The second would be a cap on the market share of liabilities for the largest financial firms, which would supplement the current caps on the market share of their deposits.  I think the administration is headed in the right direction with these two proposals,” Dodd continued.
 
Paul Volcker, Chairman of the President’s Economic Recovery Advisory Board and Former Chairman of the Federal Reserve, and Deputy Treasury Secretary Neal S. Wolin testified at the hearing.
 

Testimony and webcast will be available after the hearing at:
 
 
Below is the Chairman’s statement as prepared for delivery:
 
“We meet today, as we have over these past number of months, in the shadow of a financial crisis that nearly toppled the American economy.”
 
“It is worth repeating again the cost of the greed and recklessness that brought us here: Over 7 million jobs in our country have been lost.  The retirement plans of millions of Americans have been dashed.  Trillions of dollars of household wealth and GDP are gone.”
 
“And all of us, regardless of our political party, cannot allow this to happen again.”
 
“The Obama administration has proposed bold steps to make the financial system less risky.  We welcome those ideas.” 
 
“The first would prohibit banks – or financial institutions that contain banks – from owning, investing in, or sponsoring a hedge fund, a private equity fund, or any proprietary trading operation unrelated to serving its customers.  The President of the United States has called this the ‘Volcker rule,’ and today Chairman Paul Volcker himself will make the case for it.”
 
“I strongly support this proposal.  I think it has great merit.”
 
“The second would be a cap on the market share of liabilities for the largest financial firms, which would supplement the current caps on the market share of their deposits.”
 
“I think the administration is headed in the right direction with these two proposals.”
 
“I know the timing of them - how they have been proposed at a critical time when we have been deeply engaged in this committee on reforming the financial services sector - may have raised a few eyebrows.  But I think we need to get past that, if we can, and think about the merits of these ideas and how they would work if they could be put in place.  And so I welcome the conversations we are going to have today and later this week on these issues.”
 
“These proposals deserve our serious consideration, and so today we will hear from Chairman Volker and Deputy Secretary Wolin, and on Thursday we will hold another hearing with business and academic experts.”
 
“These proposals were borne out of fear that a failure to act would leave us vulnerable to another crisis, and of frustration at the refusal of financial firms to rein in some of these more reckless behaviors.”
 
“I share that fear, and I share that frustration.  And I strongly oppose those who argue that the boldness of these proposals is out of scale with the need for reform.”
 
“We need to take action, and we must consider scaling back the scope of activities banks may engage in while they are using deposits.”
 
“And so today I look forward to hearing how these proposals may be most effectively applied to protect consumers and our economy and also – playing the devil’s advocate - why these ideas may not work, and what risks they might pose if adopted.”
 
“Some have objected to the Volcker rule on the grounds that it might not have prevented the crisis, or that these particular limits are unwise.  I think those objections are worth discussing and I am interested in giving our witnesses and our colleagues here a chance to raise these items and a chance to have a vibrant and robust debate about them.”
 
“But we must take steps to change the culture of risk-taking in our financial sector, including the management and compensation incentives that drove so much of the bad decision-making.”
 
“I applaud the administration’s commitment to scaling back risky behavior on Wall Street.  I thank Mr. Volcker and Deputy Secretary Wolin for joining us today to share their thoughts and ideas on these proposals.  And I look forward to working with them, and with my colleagues on this Committee, Democrats and Republicans, to develop a reform package that we could bring before the Senate for consideration.”
 
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February 2010 Majority Press Releases

February 25th DODD: RECOVERY “NOT GOOD ENOUGH”
February 22nd DODD ASKS REGULATORS FOR ANSWERS ON COMMERCIAL REAL ESTATE MARKET
February 19th DODD: WATCH FOR NEW CREDIT CARD PROTECTIONS
February 11th DODD TO NEGOTIATE FINANCIAL REFORM WITH SEN. CORKER
February 5th DODD MOVING FORWARD ON FINANCIAL REFORM
February 4th DODD CONTINUES TO PRESS NEED FOR FINANCIAL REFORM
  Current record