Fed and Treasury Department Work to Stem Financial Crisis

In the midst of the 2008 financial crisis, Federal Reserve Chairman Ben Bernanke has been using policy statements and interest rates to influence legislative policy and calm capital markets. He has also encouraged lawmakers to pass a plan to stabilize the financial system.

• The Fed’s efforts have focused on:
  • Influencing legislative policy through policy statements
  • Calming capital markets through interest rate adjustments
  • Encouraging lawmakers to pass a plan to stabilize the financial system

The Treasury Department, led by Secretary Henry Paulson, has been working closely with the Fed to implement a stimulus package aimed at preventing a full-blown economic collapse. The package includes:

• A $700 billion bailout of the financial sector
• A series of tax cuts designed to boost consumer spending

SEC Moves to Regulate Markets

The Securities and Exchange Commission (SEC) has been taking steps to regulate the markets and prevent future meltdowns. The agency has been cracking down on credit rating agencies, which have come under fire for their role in the crisis.

• SEC Chairman Christopher Cox has announced plans to:
  • Shut down the Consolidated Supervised Entities program, a voluntary regulatory regime that oversaw investment banks like Bear Stearns and Lehman Brothers
  • Implement stricter regulations on credit rating agencies

Other Regulatory Agencies Take Action

The Federal Deposit Insurance Corporation (FDIC) has been working to ensure the stability of the banking system by:

• Insuring deposits up to $100,000 per person per bank
• Taking steps to regulate banks and prevent failures

The Commodities Futures Trading Commission (CFTC) has been regulating futures contracts, including those involving financial entities like currencies and government securities.

The National Credit Union Administration (NCUA) has been chartering and supervising credit unions, insuring savings in federal- and most state-chartered unions.

State Officials Take Action

New York State Attorney General Andrew Cuomo has been leading the charge against executive pay packages, pushing for stricter regulations on compensation practices. His predecessor, Elliot Spitzer, had also been a vocal critic of executive compensation.

• As the crisis continues to unfold, it is clear that regulatory agencies and state officials will continue to play a crucial role in:
  • Preventing future meltdowns
  • Ensuring the stability of the financial system