SEC Seeks More Control Over Investment Banks
Wall Street investment banks have come under fire lately, prompting U.S. Securities and Exchange Commission Chairman Christopher Cox to ask lawmakers to ramp up the agency’s authority to officially oversee them.
Cox told the House Financial Services Committee today that the nation’s biggest names in the investing world should have mandatory SEC oversight of their capital, liquidity and risk management practices. Currently, the SEC has a supervisory role over four of the largest investment firms - Goldman Sachs, Merrill Lynch, Morgan Stanley and Lehman Brothers - but it is on a voluntary basis only.
The SEC’s move to garner more oversight of Wall Street has been underway since the Federal Reserve’s bail-out of Bear Stearns in March. At that time, fears of similar scenarios playing out at other investment banks caused the Federal Reserve to open its discount lending window. Since then, the Federal Reserve has maintained that more oversight of investment banks is needed in the event it becomes obligated to lend them money again in the future.
The collapse of Bear Stearns and the U.S. subprime-mortgage market has contributed to almost $470 billion in write-downs and credit losses since the start of 2007.
Earlier this month, the Federal Reserve and the SEC formally agreed to an information-sharing pact in which the two agencies would exchange information and resources on common issues.
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