Ted Kennedy Questions Ben Bernanke

(As Prepared for Delivery)

April 2, 2008 -- Thank you, Mr. Chairman, for holding this important and timely hearing. In recent weeks, we’ve seen a widespread breakdown in the financial markets. A massive housing bubble is collapsing. One of our nation’s largest investment banks nearly collapsed, and the Federal Reserve has put hundreds of billions of dollars on the line to preserve economic stability.

The crisis has had far-reaching effects on the rest of the economy as well, taking its toll on the job market and shaking the credit

market. 7.4 million Americans are now unemployed, and two million families are at risk of foreclosure.

It’s all happening at a time when most Americans can’t afford additional pressure, after years of stagnant wages, rising prices, greater competition from overseas for their jobs, and a frayed social safety net. Now, they’re losing tens of thousands of dollars in the value of their homes and seeing their retirement savings plunge.

There are things we know we can do to soften the blow, get our economy back into gear, and prevent it from happening again.

The stimulus package enacted last month was a start, but it doesn’t address the housing and unemployment crisis, and the rebate checks won’t even go out for another month. We need to act quickly now to keep families in their homes. Chairman Schumer and other colleagues are working on legislation to help families refinance their mortgages. It focuses on the people who need help the most and puts real money on the table to get it done. I look forward to Chairman Bernanke’s views on their proposal.

It’s also time to crack down on abusive practices in the mortgage industry, especially in unsavory loan practices and predatory lending. Many so-called “innovations” have made mortgages so complex that average homebuyers don’t know what they’re signing. Better disclosure and more transparency are needed so that homeowners will know the real terms of their mortgages.

We also need to restore confidence in the credit market, and the Federal Reserve is on the front line in this battle. Investment companies like Bear Stearns are closely tied to the credit and housing markets. But regulators had no idea of the risky and complex investments on Bear Stearns’ books. The lack of regulation of these large companies is a real threat to our credit markets and we must shine a light on their operations.

The Fed had to step in with $30 billion in corporate welfare to bail out Bear Stearns last week. It’s offered hundreds of billions of dollars in subsidized loans through secret auctions to other investment banks that it has absolutely no oversight over. We shouldn’t be forking over taxpayer dollars to companies without knowing what’s on their books and without knowing if they’re acting responsibly.

That’s a huge amount of corporate welfare, and it’s coming before any relief for the millions of families on the brink of losing their homes in this crisis. Hundreds of billions of dollars in secret loans are being given out in the blink of an eye, but the Administration is telling millions of Americans who are struggling to find work that it’s too soon to give them additional unemployment benefits. That’s unacceptable, and Congress has to act.

The Federal Reserve has a role to play here as well, not just for the benefit of the financial system, but for the economic wellbeing of the nation. Hopefully, we won’t have to repeat the Great Depression before we can reach agreement that too many of our banks and investment firms are operating under no regulation at all.

Again, I look forward to today’s hearing on how the Fed can focus its efforts to better meet the needs of all Americans in our modern financial world.

Source: Senator Ted Kennedy

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